Startup Questions

[Karl00]

Well @Karl00 it appears at least to me, that you know everything there is to know about building, running, and profiting from a complete 100% new business from scratch, and making it extremely profitable as soon as you open your doors.

I wish you well. There are members here who have many many years experience and have given you some of the best advice possible here. From the simple 7 p's, to actually running a well-established extremely profitable business.

You seem to know more than they ever will do. Myself included.

So with that, I will bid you good luck.

I'm out of this thread.

I don't know everything that's why I asked several questions. If you want to believe that I do, you can. Whether I can or not is not why I posted this thread; I posted to get ideas.

First, you call expectations delusional despite past proven experiences. Then, you throw up the idea using lowest price in town as an insult which I don’t do. Then you falsely claim that I said I’ll be making ‘X’ amount from start. Then instead of answering my followup questions, you post a sarcastic cop-out response. Since you ignore questions posted directly to you, it's a good thing you will be "out" of this thread. You are a waste of my time along with the two subsequent copy-paste posters that just rehashed that I know everything.

I smell a troll. have checked this thread 3 times and each time the people have given advice worth more than gold, yet your responses have been on the defensive side @Karl00

If you don't know how to take constructive criticism you are in for a world of hurt.

If you want to be a business man listen to what they have to say, if you wanna be a technician then just carry on with what you were doing before.

Since you don’t agree or like me, you decide me to claim I smell something that dwells under a bridge. I like criticism but false accusations like you’re doing is not liked and the holier than thou responses from others. So many blanket statements in this thread like owner does not equal manager and then when questioned, they refuse to respond. It’s as if since they’re already an owner that they’re inherently better regardless. So may false accusations that begs one to wonder why they’re doing so. It really makes you wonder the success or failure of some of the posters in this thread in the real-world.

At any rate, I welcome feedback.

 

[cypress]

Since you don’t agree or like me, you decide me to claim I smell something that dwells under a bridge. I like criticism but false accusations like you’re doing is not liked and the holier than thou responses from others. So many blanket statements in this thread like owner does not equal manager and then when questioned, they refuse to respond. It’s as if since they’re already an owner that they’re inherently better regardless. So may false accusations that begs one to wonder why they’re doing so. It really makes you wonder the success or failure of some of the posters in this thread in the real-world.

At any rate, I welcome feedback.

Frankly, I don't know who you are. So how can I say I don't like you? I been watching the thread and the responses given up to when I replied are darn good ones. When I joined the forums back in 2012, I spent months reading countless threads of business questions, tech stories and all the articles on the home page which are still archived before I dropped ONE post. I recommend you do the same.

The question you have posed has been asked countless times over the years and a lot of it remains relevant. Does it mean you shouldn't make another thread? No of course not. But when you ask questions and people give you answers, you should be receptive to it.

You don't welcome feedback, because when people give their opinion you respond negatively. Remind yourself that is their opinion.

You can question "all the failures of the posters in this world", but truth be told we all started somewhere. You can either choose to look around at what has been posted and take it into consideration or keep moving on. Times change, demographics are different. That's not to say that some of your ideas won't work out, but what the posters are asking you to do is be realistic with your expectations.

 

[Krynn72]

So many blanket statements in this thread like owner does not equal manager and then when questioned, they refuse to respond.

They refuse to respond because you got offended and defensive when they posited that things may be more difficult than you expect. But in the hopes of getting the thread back on track (frankly because I'm interested in this info myself) I'll try to answer some more questions.

As I said in my first post, I was looking around and very nearly committed to opening my own place just a couple months ago. I decided not to, and here's why.

Its not as easy as you seem to think. I am in a very similar position as yourself. I can microsolder, have experience repairing many, many electronics and computers. I managed 3 storefronts (at different times, not at once though I did usually retain some responsibilities at each one). I did it either alone, or with part time help for 4 years and an essentially absentee owner/boss. Literally the only body in the store at any given time, with part time help coming and going. I did the technical work, I did the administrative work, I ordered managed inventory and parts, I developed procedures and policies, came up with pricing, did customer service in shop and on the phone, hell I even made our websites.

After talking to the fine people of this community (as well as others such as Jessa Jones and Louis Rossmann) and reading their words of caution, I decided to give myself a goal. Get enough customers on my own, without a storefront.... to pay for a storefront. I'm just talking rent and utilities even, and I am not even close to being at that point yet.

It is f-ing hard to get customers when you have no name and no budget. And I know your response to this, since it was my response too for the longest time. "If I have a shop, it will naturally draw in customers as they drive/walk by it"

But again, after talking to others, this has not been the experience of pretty much ANYBODY. I didn't believe it until I read something Louis said to me:

off the street customers are not the people you want anyway. This is a destination based business. you want people who googled or asked their friends to find you because they will show up wanting the services you offer at the prices you charge. Whereas street advertising will get you people who want to know if you fix $100 inkjet printers, if you can walk them through setting up an android phone, etc... all bs you can't really make money off of. they're services that these people need, but aren't going to pay for. "we're willing to pay you" usually means leaving $5 in the tip jar.

You don't want the customers who walk by your store and think to themselves "oh I wonder what these guys do, let's go in and check them out and see if we can come up with timewasting questions to figure out if there's anything they can help us with"

I don't mean this in an angry or mean way, because those people mean the best and they are just being curious, and god bless 'em for it. But if you're paying $3500/mo you don't want to be doing so because those passerbys are actually worthwhile, especially if a pre-existing client base is not in place to support the cost of rent! to have a bunch of people who go "ooh look, techie looking place" wondering if you'll tell them why the timer on their microwave stopped working or if you can put the helicopter piece back on their $40 drone is counterproductive and when paying retail rent, very expensive.

Worst case scenario is when people see you as an extension of an AT&T or Apple store, where they feel like they're entitled to free support because "that's the phone store." NO!!!

Jessa didn't even have hours for the first six months or so of having a store.. like you could show up and no one would be there, because just about everything the town brought her was crap you can't make money off of.

You want the people who are coming for the bread and butter services you offer, and that comes via referral network, good google ranking, etc. People who read all the yelp reviews, read my replies to them, read my website, watched my youtube videos, who went to apple already - that's my client right there. That person is pre-sold. They know what service they need, I offer it, they know the price so they wouldn't be showing up if they didn't want to pay_(rarely some do just to create controversy)_, and it makes everything easy.

I didn't have a sign for the first four years of being open, it wasn't necessary to gain traffic. I don't have a store because a store is an ideal place for this business, I have a store because it only cost $200 more than a place that was in a basement that looked like a dump for the same amount of space. If I get kicked out of this store there's no way in hell I'm looking for another "store!"

Now if you are great at selling accessories/screen protectors/cases/cheapass chargers and all the other **** people might buy out of that location then sure. These are impulse items. But don't use the advertising strategy you use for impulse stuff(oh let's buy a 2nd charger/oh let's try out their pitas/oh let's get a drink) on a destination based business(I will never go here unless I spill wine on a macbook/I will never go here unless I crack my phone).

That finally struck the chord for me. It snapped me out of thinking "People walking by will see me and want my service just because of what my service is" and made me think of my experience at the shop I worked for. The "timewasters" were probably 50% of the people who walked into the store, and this was at an established store. I have very vivid memories of days, sometimes weeks where I could not keep up with the real work because of all the time wasters who came in to ask me to pull paper out of their printer and then decided to argue with me for 15 minutes over why I was going to charge them for it. Or people who came in with a dead $40 GPS and wanted me to stop everything and fix it for them right now for $10. The amount of valuable customers is very low, and they're usually not going to know about you until you advertise for a long time and develop good word of mouth.

$35K will probably not last you long enough to float you until you get the recognition of enough valuable customers to pay your expenses. ESPECIALLY with an employee. Think about it. You microsolder right? There's $5K down up front just for a decent scope, irons, ultrasonic cleaner, measuring tools, power supply, initial batch of consumables, etc. Then another $5k down for the first months rent and security deposit (most "shop" sized places here run about $2,500/mo). Lots of places are Triple Net leases too, so add another 30% to your rent payments. Lets say your good employee is willing to work only 25hr for minimum wage (here its about $10/hr). Thats another $1k gone in the first month. Utilities and internet for the shop lets say $500. Some kind of business insurance is probably REQUIRED, so lets say another $500/mo. Oh and then legal fees and lawyer fees for getting set up, $300-$500 all told up front.

So now you and your employee are standing in an empty box of a building with a bunch of microsoldering equipment on the floor around you. You're already almost 10 grand in with just one month gone by. So you dumpster dive some tables, bring your personal PC from home to do check-in and check outs using notepad as your CRM. At least you can get a Square account for no upfront cost. You're thankful that your employee has his own tools too, otherwise you'd have to buy him screwdrivers and ****.

You're on a busy street and people walk in, and see you have nothing for sale and go "oh.... what do you guys do here" and you explain to them. "Oh, thats pretty cool, I think my cousin's girlfriends mom has a broken tablet, I'll let her know about you guys."

You've got 4-5 months of money, if you're lucky and scrimp every single cent to turn that store into something profitable despite people coming in and seeing two desperate guys in a sparce shop that echos their footsteps working on tables that looked like they were pulled out of a dumpster. Oh, and you ask for their money upfront and tell them every repair will take 3-7 days (you can't afford a stock inventory after all).

Oh, and also, I'm assuming this $35k is the "business fund" and not the "total net worth of all my personal bank accounts from which I pay for my home, food, netflix, etc." (Now do you get the Ramen reference?)

 

[Mr. Ingram's Computer Repair & Shoppe]

They refuse to respond because you got offended and defensive when they posited that things may be more difficult than you expect.

More like I am not going to waste my time when someone gets defensive rather than asks more questions. I have found good business owners don't get angry, they ask questions.

After talking to the fine people of this community (as well as others such as Jessa Jones and Louis Rossmann) and reading their words of caution,

Louis Rossmann is one of my favorite people to watch. I am watching him now!

It is f-ing hard to get customers when you have no name and no budget.

Spot on advice. I started by teaching 60YO+ people how to use facebook/email $20 an hour class. after gas I made like $15 an hour teaching 1-on-1 classes. Now, 3.5 years later, I charge $100per hr. in 15min incr.

"If I have a shop, it will naturally draw in customers as they drive/walk by it"

Nope. I my second store failed. I had to close it a couple weeks ago... I LOST over $6,000 by trying to open a second location.
Just because you pay a (insert adult word here) for a pile of bricks with conditioned air, doesn't mean business will come.



The rest of what Louis and @Krynn72 say is spot on good stuff.

 

[Bryce W]

I was always the one doing the bulk of sales and repairs, a large proportion. I have a good technician that has agreed to work for me if things get setup. I just haven’t handled the business side regarding lease, legal and business stuff, etc.

You'll want to read "The EMyth Revisited". It talks about the three types of roles. The technician, the manager and the entreprenur. You sound like a great technician but by doing this your role will change to a manager. You may love fixing computers but you probably wont get to do much of it as a manager. Its about staff training, accounting, paying bills and other less fun stuff.

 

[drpcfix]

This post was great! https://www.technibble.com/forums/threads/startup-questions.74129/#post-589313

Your question number 10 should be your first question. Have you put together a business plan? People do not plan to fail, they fail to plan.

I strongly disagree with this. If you've been in the repair biz running a shop for a while, you already have the business plan formed as habits. You know what pricing model will work, etc etc. Some people enjoy that side, some don't - you can SURELY start a repair shop without one. (As I did, and probably over 50% of the folks here)

Some are saying he's getting too defensive - it's easy to do when you think people are saying you can't do what you had your heart set on. OP - just read all the advice and prepend it with "in my experience this is what happened" - and know that it won't 100% apply to your specific case of course. People want to save you from making a mistake they made, and probably some think their fate was unavoidable and you'll end up the same. I don't.. You can do it

Everyone has a different risk tolerance, and some here are technicians that happen to be in business, some are business people happening to own a computer repair biz - these are totally different personality profiles. Some 20 yr old probably doesn't care about the same things as a 60 yr old shop owner about to sell their business.

As for the $35k being enough to start out, I started on much less - like first store I probably invested $5k. It only had a 400sq foot "showroom" and the rest was bench/shelving in the back. You could easily spend 100k making a large store with lots of retail look awesome, but an example to get a super small store setup might look like;

• $500~ 8'-16' of slot board and shelving - https://www.uline.com/Product/Detai...gclid=CJGW0eKrzNICFZFcfgodO0QNOw&gclsrc=aw.ds
• $1000 cool display case - used - might have to paint/etc (example https://seattle.craigslist.org/sno/fuo/6028807340.html )
• $3000 - A couple laptops and parts to sell (2x hard drives, 10x sticks of ram, some power supplies, etc etc)
• $500 - paint the place
• $200-$2000 nice outside sign
• $300 - some cool posters for the shop decor
• $500 for tools - you might already have them though
• $99/mo for RepairShopr
• $300 - receipt printer, label printer, spare paper
• $100 - cash drawer
• $300 - some monitors for the back workbench
• $100 - nice LARGE power strips for the back
• $700 - synology nas for software tools/backups/etc
• What else? Should we wiki this?

Other ppl said don't expect to hit those revenue numbers in first months - totally agree. LOCATION is major important, and even in my good locations I had months that only made like $1500. I'm pretty sure my first 18 months were like; (in thousands) 1,3,2,5,2,3,5,7,3,5,3,9,5,3,10,5,etc eventually leveling out at like 12k/mo at that store for a couple years. There are totally some stores that pop up and just hit 10k/mo, I've seen it, but it wasn't my experience and I don't think it's common. You could totally be fine with a revenue pattern like this, but I would expect lumps like this.

I’ve always deemed insurance companies as corrupt and dishonest and many are a total waste of money. Business insurance, on the other hand, I will still look into. Many things like data loss could be covered in signed documents. If a tech destroys a customer’s system, would insurance cover something like that?

I also dislike insurance companies in general - and if you have absolutely no assets and don't mind the risk, it's kind of up to you. Some leases will require it, don't be surprised if you run into that..

Some businesses use eSignatures, not a problem. Anything to better organize and save time should be preferred.

Yeah, you can be paperless except for credit card receipts probably. When you said "paperwork" above I was thinking like; state/federal taxes, payroll, all that fun stuff you get stuck doing - it's mostly electronic now - and a good bookkeeper can actually do all of this for you.

We've had bookkeepers that couldn't do any of it well, but when our tax lawyer recommended hers - they are awesome and can do payroll/bookkeeping/etc - you can basically just look at QB once a month and be fine. Some people here will disagree and say you need to look at financials daily, but when just starting out - and if you aren't interested in that stuff - you can make it (like I did) just watching the bank account and having a feel for the margins at first while you get used to everything.

I didn't really understand a P&L (or care at all about it) until after like 5+ years doing it.

Which exit strategies exist? Before even starting one, I was considering the possibility of potentially selling the business. Whoever would buy it if they lack the skills, they wouldn't be as successful though. Question would be is to how to value a business for sale.

I sold my shop for like 1x "gross profit" - there are lots of ways to value the business, but they all have one thing in common - good documentation, good customer database, logs, records. If you use (something like) RepairShopr it'll basically give you 100% of what you need to pass the business on to the next person. Nobody wants to buy a business that's just a dropbox folder full of invoices made in MS Word. (It happens!)

If you get the business up to like 200k revenue, and pay yourself like 50-100k, you could probably get someone to pay you anywhere from 50-300k for that business - depending. I'd bet money you'd sell it around 100k though.

This is all about the buyer and the seller, and can swing pretty far based on circumstance, how much money the buyer has, how savvy they are, how badly you want to sell, etc etc.

I was aware most business fail, and I can completely understand why after managing some. It's my opinion most fail due to bad management and staff. Considering past experiences, I have a hard time imagining losses would happen. At the same time, revenue should be flowing in. Realistically how high could expenses be: rent, insurance, marketing, labor, parts, tools, etc.? Is $35k not enough? It's my impression getting up to speed would be far more important than what one has initially saved. The one person I'm going to hire is considering possibly moving out of state. Paying them $2,000-2,500/mo doesn't seem like a lot. If that person leaves, then labor cost would then be zero.

Yeah, I agree it's mostly bad management and staff - although you've probably seen an awesome business go into a super bad location and just never go anywhere and then close. I would say it's management+staff+location. My one piece of advice here is try to sign the shortest lease possible even if the location is 100% proven to work - it's the worst to try to get out of a commercial lease. (worst experience in my business career for me for sure)

7: Finances: should I get a separate bank account, credit card, etc. with my business name?

If you are starting out mobile or from home - you don't "require" all the business stuff like bank account/etc - but it's only like $100 to register your business and bank accounts are basically free - you will basically require it if/when you have employees/contractors - and it makes getting a merchant account way simpler. I'd go through the hassle to set it all up either way - but especially if getting retail/commercial office.

(side note, people talk about using a business to limit your liability - imo it's mostly BS and no matter how awesome your LLC is setup people can still individually sue you at will. A lawsuit doesn't just get thrown out because you have an LLC, a judge/jury can still hold you personally liable for a million different reasons. I wouldn't do it "just for the liability part" - but it'll make taxes easier, lots of good reasons there, go get a free consult with like 2-3 CPAs and ask them this question. That'll be fun.)

Anyway - fun post - I could type here all day

 

[Mr. Ingram's Computer Repair & Shoppe]

. LOCATION is major important

I moved 2/10s of a mile down the road, I am the same distance off the same road with the same amount of visibility. The difference is I moved onto a different side of a stop light. I went from 0-2 customers a day to 2-5 customers (of course, some days I get less or more. but those are top-of-the-head average GUESSES.) Simply being on the other side of the stoplight and hill I am getting WAY more customers. Blows my mind.

Of course this could just be me growing and of course I should expect more customers on year 2 than the first year of being open. but I believe LOCATION had to play a MAJOR roll.

I had months that only made like $1500

Agree. Some months I don't take any money from my business for my personal life. Some months are just (insert adult word here). But then in three days a couple weeks ago I made just over $2,200 PROFIT (after parts/overhead)

Just leave enough money in your bank you can have several (insert adult word here) months just in case.

I was told never treat $0 as $0. Instead make a number you feel safe with and make that $0. Example $5,000. You can NOT let your bank go under $5,000. that last $5K is there for protection and emergencies. Of course, if you have to spend $2,400 on a business client, then use that $5k, that is what it is for. but make sure to get it back over "$0" before starting your next project.

^That is one of the best pieces of advice I have ever gotten.

I also dislike insurance companies in general - and if you have absolutely no assets and don't mind the risk, it's kind of up to you. Some leases will require it, don't be surprised if you run into that..

For $500 a year. I enjoy sleeping with a peace of mind. But of course. if it is LEGAL to NOT have business insurance, and you want that risk. Bloody go for it man. $500 is almost a month of overhead for me!

When you said "paperwork" above I was thinking like; state/federal taxes, payroll, all that fun stuff you get stuck doing

I thought the same.

But for customers/money tracking. I do it all on the PC. I got a computer dedicated for those two things.

you don't "require" all the business stuff like bank account/etc - but it's only like $100 to register your business and bank accounts are basically free

This like insurance, I like. Keeps money over the table and easy to track. I defiantly agree you should get a business (checking) bank account.

 

[16bwhitt]

I was told never treat $0 as $0. Instead make a number you feel safe with and make that $0. Example $5,000. You can NOT let your bank go under $5,000. that last $5K is there for protection and emergencies. Of course, if you have to spend $2,400 on a business client, then use that $5k, that is what it is for. but make sure to get it back over "$0" before starting your next project.

That is really great advice for a startup, Mr. Ingram!

I would even say make that number a moving number, as your business grows. Start out as thinking "$0" as $5,000, and as you grow in profit, move the $0 number to $7,000, or $10,000, and so on.

 

[Mercenary Roadie]

6: How to handle payroll and taxes?

7: Finances: should I get a separate bank account, credit card, etc. with my business name?

My advice will only cover these two questions of yours and since you haven't provided much information on where you are located other than the US it will be rather vague and generic.

My advice will only cover these tow questions of yours and since you haven't provided much information on where you are located other than the US it will be rather vague and generic.

6: How to handle payroll and taxes?

There is a lot you have to know about your payroll and tax requirements as an employer.

Payroll is comprised of the following

A. Employee pay
B. Federal Income Tax (FICA)
C. State Income Tax (SIT)
D. Medicare
F. Social Security
G. Federal Unemployment Tax (FUTA)
H. State Unemployment Tax (SUT)​

Items A, B, D, F, and G everyone pays. Items C and H will depend on the state you are in. There can also be local taxes.​

A. Employee Pay

This is self-explanatory and varies.​

B. Federal Income Tax (FICA)

Will vary on the amount you pay your employee and must be deposited with the IRS quarterly if the amount is over $2500.00. The employee pays the full amount of this tax via payroll deduction.​

C. State Income Tax (SIT)

This will depend if you state collects income tax and the amount will again vary. Most states require a quarterly deposit of this tax. The employee pays the full amount of this tax via a payroll deduction.​

D. Medicare

You must withhold 1.45% from your employee pay via payroll deduction and you must pay an additional 1.45% for a total of 2.9%​

F. Social Security

You must withhold 6.2% from your employees pay via payroll deduction and you must pay an additional 6.2% for a total of 12.4%.​

G. Federal Unemployment Tax (FUTA

FUTA can is complex to figure out because it depends on whether you pay SUT. You must pay 6.0% of your employee's gross pay and can deduct up to 5.4% if you pay SUT. The employer pays this tax.​

H. State Unemployment Tax (SUT)

This will depend if your state collects this tax and if they require the employer to pay the full amount or if it's split between the employer and employee.​

You are also required by the majority of states to have Workers Compensation Insurance if you have any employees and this is an expense you pay.​

7: Finances: should I get a separate bank account, credit card, etc. with my business name?

It is recommended that you have a separate Bank Account and Phone for you business and keep them separate from your personal finances. If the IRS or State tax entity Question if your business is r4eal or just a hobby this will help you.​

As to having these account in your business name will depend on how you have set it up. If you have your business set up as a Sole Proprietor then it is a Doing Business As (DBA)company and you are the company and your bank account will normally be in your name with the DBA and company name added.​

If you set up as a corporation or such then it is its own entity and all of your bank accounts and such would be under the company name.​

I am not an accountant, CPA or tax attorney. Take anything I have written with a grain of salt as it is how I understand the tax system.

 

[mrbadgolf]

I saw some. good advise here

 

[Brent_Rabe]

Thank you to the people that gave answers. These are actually some questions I had while trying to form my startup.

 

[~Wendy~]

My state in the US has personal property taxes too-that means everything you have in the shop...every screwdriver, computer, hand tool, printer, lights are valued and taxed to the hilt. My business is in my home office and I bought 3 million dollar insurance policy just for the business...if you lose the client's family photos, documents etc you can get sued-don't discount the need for it. Also, being a technician is NOT the same thing as being the boss. If you are trying to be a jack of all trades you will be in for a big surprise.

 

[glennd]

I'm looking forward to reading his book cos I'd certainly like to make $150K this year!

 

[Markverhyden]

My state in the US has personal property taxes too-that means everything you have in the shop...every screwdriver, computer, hand tool, printer, lights are valued and taxed to the hilt.

Got that here as well. But when I called about what to put in they did not seem to care about simple hand tools. Just "capital" goods. So anything with electricity. The good news is I can use fair market value. So a Bosch hammer drill I paid $200 new is only worth $50 two years later. And any computers depreciate even quicker.

I did get a chuckle with some of the categories. For instance utilities get taxed on poles. LOL!!!

 

[Benjibabs]

I was told never treat $0 as $0. Instead make a number you feel safe with and make that $0. Example $5,000. You can NOT let your bank go under $5,000. that last $5K is there for protection and emergencies. Of course, if you have to spend $2,400 on a business client, then use that $5k, that is what it is for. but make sure to get it back over "$0" before starting your next project.

This is a great idea. I'm sticking it in my back pocket as I continue to work on my startup. Thanks!

 

[glricht]

Now that this 2-year-old thread has been opened again, I just have to ask: does anybody know what happened to the business @Karl00 was going to start? Was he able to make it?

 

[fencepost]

I'll also throw in a book recommendation for "Profit First" by Mike Michalowicz.