Business Advice

[djgout]

So I'm wondering how many of you are full time techs? And I'm after some free advice so I know what it's worth....

I've been working full time as a tech for the past 8 years or so now as an employee for a pro audio company. I've been the head tech for 7.5 of those years and it's getting well past time for me to move on. There's no possibility of making more money there and I hate to feel topped out at 30 years old. Many of our clients have also said that they wouldn't do business with us if it wasn't for me, and recently I've had quite a few ask to hire me outside of our normal operations. I've also had several cold calls from studios that have never done business with us and wanted to hire me directly based on word of mouth.

Moral issues aside, I think it's time for me to have a conversation with my boss about going off his payroll and doing an independent contractor thing if he wants to keep me about. I just need to have all of my ducks in a row before I make that plunge. It's been easy to charge more than double what I make hourly there and as of right now I've got hours of work and not enough time to keep everything juggled. Specifically I'm curious as to how everyone is invoicing clients, collecting/not collecting taxes, and paying taxes/self employment fun hoops to jump through.
I'm looking into starting out with just a DBA and then from there hopefully something with some more protection for my personal finances.

Also does anyone have any experience with small business loans for starting out your tech business? If I do the DBA thing most of my tools will be easy to convert to business use, but there's some of the slightly bigger ticket items that would be good to have available.  I'm investing what I've made on the side so far into more crimpers/de-pinners and simple test stuff like a MR Pro and a decent portable scope, but is there anything you all wish you had that would lead to more business? A desoldering station is of course high on the list, but I think that could wait until I have a desk to recap....

rambling I know. Any advice is greatly appreciated.

 

[JohnRoberts]

I have experience with banks saying no for vague working capital needs... My successful business loans were based on clearly defined short term needs, with clearly explained pay back (like borrowing to buy parts for an upcoming kit article, with previous articles experience to use to demonstrate anticipated profitable results).

Banks will want to see a revenue stream to justify how they will get paid back. The failure rate for start-ups is high. Banks will expect collateral (like a house) that they will use to collect their money back with if you fail. 

To start up a business, you really need equity (investment) not debt. Often new business start-ups get start-up capital/private loans from close friends and relatives, and lots of sweat equity.

=======

Can you work out a consulting/contracting relationship with your boss, so you can keep some revenue flowing from that stable income source, it could help carry you through lean periods (there will be lean periods). This will be problematic if your business competes with your old boss. In that case not only do you need a clean break but he will work against you. Look for some kind of win-win.. If hew can get the same benefit from you for less hours, that may be his win and free you up to branch out.

Good luck,.. been there done that... and also closed down a few businesses along the way that didn't cut it. Be prepared to have an a__hole for a boss, when you work for yourself.  8)

JR

 

[dmp]

My opinion is business loans are a shame. You won't qualify without signing a personal guarantee, meaning that you are putting up personal assets as collateral. Even if you don't have personal savings to cover the loan, if you default, the obligation will follow you. Banks require you to sign a personal guarantee since LLC regulation tries to shield personal assets from business liabilities.

As far as $ - don't underestimate the amount of time and money you will spend on business development. And don't underestimate how nice a steady payroll is.
In a small business as a consultant, my hourly rate was 3 times higher than it is now, working (as an employee) in a medium size business. My net take home is about the same.

Specifically I'm curious as to how everyone is invoicing clients, collecting/not collecting taxes, and paying taxes/self employment fun hoops to jump through.

All of this stuff you can figure out. You pay estimated taxes, and 15% FICA if you are self employed. You don't collect taxes from clients unless you are selling them a product. you send them a 1099 if they pay you more than some amount ($500?). You can buy a package deal for a business start up from a lawyer for a few hundred dollars. It is probably worth it in hindsight. I did all the research myself to start my business and you can end up spending a lot of time.
The more important issue is to have a solid business plan. The best advice I can give is to make an appointment at a local SCORE. You can meet with someone who has started and run a business to help you out. First thing they will want to see is a business plan.

 

[abbey road d enfer]

My advice: don't start with a loan. It's a liability that distracts you from your target.
I would suggest you take the opportunity of these phone calls you get from studios to establish some capital for start-up.
That's what I did 30 years ago. I worked for a large studio and had some phone calls from smaller studio owners who asked me to install their new studios or whatever they had to do. I moonlighted for a couple of months (that included working from XMas eve to New Year's day to get the thing rolling on Jan 2nd!) and I got my company started. That's a time where you have no family life.
It's the price to pay for the privilege of being an entrepreneur, which is vacations, margaritas, women coming in first, leaving last, worrying about bills and paying company taxes...
Don't spend too much money on tools you'll never use, but I can tell you one of the best decisions I made was buying a very nice and very expensive toolcase. Just showing it to the customer, he wouldn't discuss the price I was asking. One very important element of success is that you have to look the part. A portable oscilloscope is a definite bonus (just make sure it doesn't look like an i-Pad).

 

[pucho812]

there is always going to be tools we want and or need. If you have been able to get by without them, wait until such a time is feasible without a loan to pick them up or get them when it is absolutely necessary.  I'm still in need/want of an ap machine or the equivalent but I've been able to get by without it and do not need such a huge expense.

Bank loans do help but not without their own set of problems so I would avoid that as much as possible.

My opinion would be to see if you can horse trade, wheel and deal work in exchange for space and such. see if the company you work for now would move you to part time so you still have a steady income all be it smaller then try and work out with them the use of shop space to do outside repair jobs and such outside of your part time job with them. I'm sure in this climate they would be more then willing to work out that kind of action. Shop space and such can be a big expense, if you can get it free all the better.  It's a good work around until things get so big you no longer need the part time check and can completely move on. Also by then you will have most kinks worked out in terms of taxes and all the rest. Don't forget healthcare insurance the government will force you to buy....

 

[sahib]

I don't know your location but in UK you will not get a business loan. For the simple reason that you do not have a business income yet. Having assets as a security against the business loan aside, you have to be able demonstrate that you can service the repayments. To be able to do that you need business accounts.

However, as you are currently employed if you have a property then you can get a personal loan. Just don't tell the bank that you will use it for your business. Tell them you'll get a new bathroom fitted and take a holiday. But the interest rates on personal loans are sky high. The cheaper alternative is to extend your mortgage.

However, I have worked for myself pretty much all my life and as a principal I have never secured any business loan on our home. And I will never do and I do not advice to anybody to do so. In fact our home has always been under my wife's name. Not that I would walk away from any debt, but if something happened to me then the ones left behind would suffer.

 

[PRR]

The Incredible Secret Money Machine, Don Lancaster

http://www.amazon.com/Incredible-Secret-Money-Machine-Lancaster/dp/0672215624
http://www.abebooks.com/servlet/SearchResults?sts=t&tn=The+Incredible+Secret+Money+Machine

Yes, it is older than you are.

Some details will sound quaint.

Some of it doesn't quite apply to your situation.

But it is still an excellent thought-provoker for small tech business. Could be worth a lot more than $25-$50.

 

[Gold]

The Incredible Secret Money Machine, Don Lancaster

His Active Filter Cookbook is excellent. Clear and easy to read. I'll check this out.

 

[thermionic]

The Guru's Lair: http://www.tinaja.com/

Well worth a visit.

 

[djgout]

Thanks for the advice everyone. I have to agree about the nice tool case suggestion. Often clients wouldn't take me seriously, being young as well, but after I did get a nice (organized!) case it hasn't been an issue.  I'm  not going to take out any loans especially anything against our house. I suppose I'm going to talk to a few friends locally who have small businesses going and see if they can help me sort out setting up setting up a DBA or LLC, the last thing I could use is getting messed up with the tax man.

I think the best idea is to see if I can work out an agreement with my current boss to change to part time for a bit just to get my feet further underneath myself and I'll find Don Lancasters book in the mean time.

 

[gyraf]

The book is available as .pdf - for free - at his site:

http://www.tinaja.com/ebooks/ismm.pdf

Jakob E.

 

[0dbfs]

In my opinion having a business set up for invoicing, purchasing, and all that is great if you keep up with your accounting and taxes... Very similar to working for "the-man" except you have to find your own clients/vendors, keep track of the paperwork, and make sure you have cash-flow to pay your vendors and yourself (not necessarily always in that order). It is something that you can maintain even if your business isn't a "full time gig"...

You don't need to quit your day-job either but of course at some point you will hopefully need the time more than you need the cash-flow it provides you.

From what you describe, it sounds like your company will be competing with your current employer so I would be careful about taking business, expertise, and good-will away but if you're going to be "taking customers" take the best ones and leave the worst ones.

Good Luck!
-jb