Project Management 411

New Entrepreneurs! Here’s How to Get Through Your First Holiday Season

by Bob Turek on November 29th, 2007

Our apprentice-like challenge is in its fourth week and the b5 Media Aces have completed their response to the fourth and latest entrepreneur challenge. The advice should serve any entrepreneur attempting to get through their first holiday season. Let us know what you think.

Kay, our intrepid entrepreneur, is seeing some great success with her hats and aprons as the holiday season moves into high gear – they make great gifts and sales are exploding. Of course, new challenges have resulted from this success, and project management, both for now and in the future, is becoming an issue:

The orders are pouring in for Kay’s children’s aprons and chef’s hats. In fact, she’s not sure that she can keep up with processing orders over the phone, packing the orders and making the actual product. She is worried that some part of her business will suffer. She is considering hiring an additional person to help her get through the holiday season but she’s not sure that she can afford someone full time - and she doesn’t know what that means in terms of taxes, benefits and more. She’s also considered part time or outsourcing some of the work but she doesn’t have a clue as to which option is best or what task or tasks would make most sense to offload. She never had an actual business plan - her plan had been to address each issue as it arose. Kay is facing the dilemma that most all small businesses face at one time or another: is it time to grow? Can she afford it? Can she afford not to?Offer Kay advice on two key points:

1. What’s her best option for getting through the holiday season?

2. What should she consider for a more long term strategy after the holiday season?

Point 1. Getting through the holiday season

With orders pouring in and the holiday season in full swing, you need to focus on moving product and making money. Some suggestions:

Turn first to family and friends. It is important to find people you trust, and who are already somewhat familiar with your business, to cut down on the amount of time spent interviewing and training helpers.

• Always pay your helpers so that they have an incentive to work hard, even friends and family.
• Note that with a profit margin of $8 on hats and $7 on aprons ($11 on sets that include both), you should be able to afford to pay someone (or two someones) $8 an hour, assuming that you can finish at least three or four aprons and three or four hats each hour.

If family and friends are unavailable, look to local universities. Business interns are usually happy to help in return for class credit and a small stipend. They are competent and require minimal training in most business-related functions.

• Resort to the formal hiring process for a part-time employee only if all else fails.

Let the helpers handle the non-assembly tasks. Because training someone new to create the aprons and hats would be time intensive and may affect the quality of your products while the new person gets up to speed, focus your attention on actually filling your orders and delegate order taking, packing and shipping tasks to your helper(s). As a sole proprietor , you can deduct wages paid to independent contractors. Instead of setting up payroll for this holiday season, treat your helpers as independent contractors, avoiding the need to worry about payroll taxes. For more information, visit http://www.irs.gov or call the helpline at 1-800-829-1040.

• There are additional tax benefits if your helpers include your spouse and/or minor children.
• Keep in mind that you don’t need to obtain a W-9 or issue a 1099 for tax purposes if the total compensation to an individual is less than $600. At $8/hour, that’s 75 hours of help per person with no extra paperwork if you use an independent contractor rather than an employee.

Point 2. After the holiday season

Once the holiday season ends, you need to seriously consider where you want to go with your business. Do you want to remain self-employed? Or are you looking to become a small business owner? If the latter, you will need to make changes and let go a little, learning to trust others to perform tasks in your organization. Before you create your business plan, consider what you want and spend some time thinking about what you want your business to look like. Ask yourself this question: “How do I see my business in 5 years?” Create a vivid picture in your mind and then write it down. Make it as specific as possible, thinking about location, products, types of customers, numbers and types of employees, everything you can think of. Dream big. Make it real in your mind. Until you do this step, you won’t really know what it is you’re planning. Once you have a handle on what you want for yourself in your business and your life (because your business will affect your life), start formulating a solid business plan. Here are some resources that can help you:

• Local university or college business program. Many business B.A. and M.B.A. programs are willing to take on business plan development for local businesses as a class project. Taking advantage of this resource (and even sitting in on a few classes!) is a good way to learn more about business planning and your options for growing and maintaining your business. The plan should include a look at adding full-time employees and buying production premises in the distant future.
• Other local business resources. Most cities and towns have a Small Business Development Center that offers strategic planning advice and help. Additionally, SCORE ( http://www.score.org/index.html ) offers mentoring and helpful resources. As a woman, checking to see about a Women in Business workshop or organization can be done, and most Chambers of Commerce offer some level of business planning help.

Points to address in the business plan:

Develop your website and an automated ordering system. After the holiday season, when you have money from all the product you’ve moved, is a good time to develop a new site. When developing your site, include online, automated ordering. This will help streamline the ordering process and free you up to focus on creating your product.Consider hiring someone part time. After your temporary independent contractors go back to their own concerns, consider hiring part-time help to handle orders, packing and shipping. If one of your holiday helpers is willing, and you’re pleased with the level of work you’ve seen so far, give him or her first dibs.

• If necessary, you can hire and train someone to help you make aprons and hats, and with the holiday rush over, you will have more time to do this.

Consider forming a corporation. Business planners from the sources mentioned above can help you explore the benefits of different types of corporations, including an LLC or an S-Corporation. If hiring employees is something you plan to do, an S-Corporation might be preferable because it may better meet your payroll needs . If you have an accountant friend or acquaintance, he or she may be able to guide you in the right direction. Also, the small business section of the IRS website ( www.IRS.gov) provides a great breakdown of different types of business structures. The Small Business Administration’s online Small Business Planner (www.sba.gov/smallbusinessplanner/index.html) is another valuable source of information that’s easy to understand.

• After exploring the possibilities with your free “business advisers,” it is worth the $150-$300 to have an accountant help you set up your corporation (do the paperwork, etc.).

Keep the future in mind. Once you’ve addressed the immediate concerns, with the help of your business advisers, go back to the picture you developed of your business and explore the following: a more developed marketing plan, branding your company with a logo, trademarking, benefits for full-time employees (which may be part of your long-term vision), and retirement plan options for yourself. If you ultimately decide you want to go whole-hog on the business end, consider a 10-year plan that includes such milestones as hiring multiple employees and teaching them to assemble the products, and setting up a full range of benefits. Also, you will have to consider whether you want to purchase or rent facilities beyond your home in the future, and create a plan for raising the necessary capital.

______________________________________ Thanks to the b5 Media Business Channel bloggers behind this post: Accounting Solver, Biz Chicks Rule, Brandcurve, Common Sense PR, Copyblogger, Doing Biz Abroad, Greener Assets, Interview Chatter, Leadership Turn, Linked Intelligence, Project Management 411, Second Life Pros, Small Business Boomers, Successful Blog, The Golden Pencil, Yielding Wealth

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