Business Idea Needs Profile of Profit Potential
Q: I modified a fanny pack so it attaches to our dog’s neck and filled it with plastic bags, so we can pick up after him when the inevitable happens while we’re out jogging. I had 25 samples made and registered the trademark “It’s My Duty.” I want to market and sell this idea, but I am paralyzed at this point. How do I proceed?
--Bonnie Kingry, South Pasadena
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A: I teach a course called “ABCs of Starting a New Business,” and I find that many people have brilliant ideas, especially in the very dynamic marketplace we are experiencing right now. But what separates an idea from a business is the answer to one basic question: Can it make money?
A successful business has to make a profit. Ask yourself: Can your idea become a product that will sell? Who will buy this product? How much are they willing to pay? What will it cost you to produce, market and distribute it, and what kind of profit margin can you make? The answers to these questions will become the basis of your feasibility plan--the first step a would-be entrepreneur should take when considering whether to start a business.
Next you will want to do some systematic market research. Go beyond asking family and friends what they think of your concept. You have to separate yourself from this idea and be willing to accept objective evaluations of your idea--whether they are positive or negative. You should also understand your market and consider the life cycle of your product. Will it sell well for several years or simply be a fad that will come and go within a few months?
You should also do plenty of initial research on the industry you plan to target. Do you understand how this industry works? What has been going on in this industry recently that might affect your product? Who else sells this product? If you have not thoroughly researched that question, you may be surprised to find that someone else is already making this product cheaper than you can.
How much money do you have to invest in getting this product off the ground? Develop a brief financial projection, including the cost of developing your product, marketing it, distributing it and the basic start-up costs for your business, and then do a minimum one-year projection.
Often your chance of success in business depends on your individual ability, experience and willingness to commit yourself to this idea. The best place I can think of to figure that out--and find assistance with the details of getting started--is through a class designed for business start-ups.
We offer a seven-week program called Fast Track One that is designed for people like you who are pursuing ideas and thinking about starting a business. The class teaches you not only about business but about whether you are suited to run your own business. The cost is $125 and you can find out about it and some of our other small-business classes by calling the Minority Business Development Center at (818) 394-3111 or USC Business Expansion Network at (213) 743-1726.
--Efrain Gonzalez,
program manager, West Los Angeles County
MBDC/USC BEN
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Q: Are there any legal requirements that I need to be concerned with when going into clients’ homes to provide tax-preparation and bookkeeping services?
--Fenella Williams, Los Angeles
A: The answer depends on the type of business you’re in and how you get your clients. As long as you are doing information-gathering and bookkeeping--and not giving legal, tax or accounting advice without the proper credentials--the main requirement you would need to cover would be getting a business license from your city and possibly the cities where you are performing this service. Obtaining licenses from each municipality that you visit could get costly, so I would advise asking your accountant about the specifics.
I would also advise you to consult your insurance agent about your coverage and whether it is adequate to protect you if you go into other people’s homes routinely and something unexpected happens--say you get bitten by the family dog. If you invite clients into your own home, you also need to make sure your homeowner’s policy covers doing business at home. Many do not, and you may need to add on some extra coverage there.
--Harold Stokes, attorney specializing in business and corporate law, Irvine
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If you have a question about how to start or operate a small business, please mail it to Karen E. Klein in care of the Business section, Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016, or e-mail it to kklein6349@aol.com. Include your name, address and telephone number. The column is designed to answer questions of general interest. It should not be construed as legal advice.
