'Idiot'-Proof Advice for Your Low-Cost Startup
One of the first troubles Gail Margolies Reid ran into when starting a home business as a certified public accountant was how to figure out how much to charge for her services. Reid had worked as an accountant at Arthur Andersen for about four years, and found it hard to work at a big firm with a newborn child at home.
With her husband working a full-time job, Reid quit and opened her own practice in 1986. She charged $50 an hour, which added up to thousands of dollars for some clients with complicated accounting problems. She ended up discounting her price for some people after realizing it was too high a total cost for them to pay. But that didn't work too well for her new business.
"I often ended up discounting fees out of empathy, and I didn't have enough empathy to support my family," said Reid, who writes about how to make such decisions in the new book 'The Complete Idiot's Guide to Low-Cost Startups.'
She said she realized that not every client was worth keeping, and let the ones she couldn't afford to work with go.
More people are losing their jobs in the recession, leading more people to start their own businesses from home. Reid estimates the failure rate of such new businesses at 50 percent in their first five years. Another estimate puts it at 30 percent losing money over the lifetime of a business, and another 30 percent breaking even.
The good news is that starting a new business can be inexpensive, with $1,000 or less needed for most, she said in a telephone interview with AOL Jobs. With a computer, phone and Internet connection at home, many people already have what they need to get started.
Most of the book is on various low-cost startup businesses and how to get them going, including estimated start-up costs and estimated first-year revenue. But the most informative chapters are the early ones that describe how to write a business plan, worksheets for revenue and costs, how to develop a marketing plan, and how to find the gap in your marketplace. There's also advice on how to create a work space, how to keep up with paperwork, and dealing with taxes.
For pricing strategies, the book recommends that a new small business be in the middle of the pack. Don't charge too much or you won't get any business, and don't charge too little or you'll get too much business that isn't worth your time and won't cover your expenses.
Starting Reid's CPA business, which she sold in 2008, also taught her the good habit of how to collect her fees. She quickly learned, she said, that she had no problem picking up the phone and telling customers to send her a check if they were late on payment.
Another good skill to have is being able to identify the skill level of people you need to hire. Successful startups can need more employees to get the work done, and it takes some trial and error to hire people, she said. Reid also learned how to be a good manager by letting them go when it wasn't working out. About 10 percent of workers end up being good employees to keep, she said.
"It's really difficult to fire nine out of 10 people that you hire," Reid said.
The book lists more than 100 low-cost startups in such fields as home maintenance, home makeovers, personal services, hospitality, and business good and services. Startups often focus on a hobby or special skill the owner has. Some of the jobs listed in the book are: handyman, window cleaning, vacation concierge, home inspector, house painting, feng shui consultant, garden design, yoga teacher, elder companion, dog grooming, music lessons, tour guide, grant writer, graphic designer, and eBay sales.
Each job has a description, estimated startup costs, estimated first-year revenue, equipment and supplies needed, time commitment needed, pricing and payments, and special requirements.
For example, a personal chef can expect to pay $250 to $1,000 in startup costs, and earn $21,000 to $35,000 in the first year. They'll need to bring their own equipment if the customers' kitchens don't have everything. A typical day can include meal planning, grocery shopping, cooking, freezing meals, leaving serving instructions, and cleanup. The national rate is $30 to $60 an hour.
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