Beating the Odds
Still, tens of thousands of Floridians set up shop every year, each confident he or she will beat the odds. When Sharon Fisher started her Orlando events-management business, Memories Unlimited Inc., three years ago, she had worked for other recreation businesses for 15 years. She reasoned, "If I could do it for them, I figured I could do it for myself."
And she did. With $3,000 in savings, Fisher, now 37, began the venture from her home, focusing on events and "teambuilding" activities at Orlando conventions. Today, she has four full-time employees, revenues of about $500,000 and last year turned her first profit.
What It Takes
Creating a successful business takes research, planning, good management and, of course, money. A would-be entrepreneur should consider:
What does the customer want? Talk to at least two dozen potential customers to determine if there's really a market for your product or service. Pin them down on what they are looking for - price, quality, features, customer service - and whether they'd buy from you.
Who are the competitors? Determine what established businesses are doing right and wrong and whether there's an untapped niche market to be served.
Is location important? Service businesses often can be run from a home office or out-of-the-way commercial space. For restaurants and retailers, however, location often determines success or failure from day one.
When Fred Rodgers and Mary Nunis decided to open Top Drawer Consignments, an upscale home furnishings resale shop, they picked a site in Orlando's College Park area. "We have a lot of drive-by traffic as well as pedestrian traffic," says Nunis. Before settling on the location, Nunis and Rodgers conducted their own unscientific, but practical, market research. "Fred and I would stand out in front and see who was driving by," recalls Nunis.
What's the profit potential? Figure out monthly business overhead expenses (rent, insurance, payroll, utilities, etc.), how much it costs to produce the product or service and the sales price.
From this information, determine the monthly break-even point (see Break-Even Analysis below).
To get a business up and running, the first decision is how to structure the operation legally. This choice determines how taxes are paid, who's liable and, in part, what forms to file. There are three main choices:
Sole proprietorships are easy to set up and easy to disband. Profits are taxed at the owner's individual tax rate. A big drawback, however, is the owner's unlimited personal liability. In Florida, that liability is limited by the state's homestead rights, preventing creditors from seizing an owner's home.
Partnerships, formed as easily as sole proprietorships, allow two or more people to share liability and provide capital. Business income is reported on partners' individual tax returns. Limited partnerships must file with the Florida Department of State, Division of Corporations (904/487-6052) and pay $35 (to designate a registered agent) and $52.50 to $1,750 in filing fees.
"A partnership is like a marriage, but it's harder to get out of," says SBDC consultant Parrish, adding, "Be very, very careful if you enter a partnership. Get a written partnership agreement."
Corporations are separate legal entities that must be incorporated in this state with the Florida Department of State, Division of Corporations ($70 in mandatory fees plus $52.50 for an optional certified copy). With a traditional "C-Corporation," the corporation, rather than individuals, pays taxes and assumes liabilities. Florida has a 5.5% corporate income tax.
An alternative for most small business start-ups is the "S-Corporation," which allows the owners to share income and expenses and report them on their individual income tax returns. There's no corporate return to file and no Florida corporate income tax to pay.
Depending on the legal structure and type of business, certain forms must be filed. "You feel like you're on a scavenger hunt," says 27-year-old Mila Turtle, who opened a home-based graphic design business in St. Petersburg a year ago.
Here's what you'll need:
"Fictitious Name" registration. Do this first. Anyone who conducts business in a name other than his or her own must register with the Florida Department of State, Division of Corporations ($50 for five years). Turtle, for example, does business under the name Turtle Moon Graphics. Although her last name is part of the business name, she must file. The name also must be advertised one time in a local newspaper. Corporations and limited partnerships doing business under their legal name don't file.
Occupational Licenses. Required by many Florida cities and some counties. Check with city hall and county tax collector. Fees vary by type of business and location.
Sales Tax Certificate. Florida businesses must collect sales tax for many products and services. The Florida Department of Revenue (904/488-6800) issues certificates ($5 one-time charge) and monthly payment booklets. Service business should check with DOR to find out who pays and when. Turtle suggests, "If they tell you your service isn't taxable, get it in writing."
"If you can't say what your monthly break-even sales are, you don't know what you are doing," says Jim Parrish of Tampa's Small Business Development Center. In the example below, the business needs $20,000 in monthly sales to cover costs. Here's how to put together the numbers.
1. Add up monthly overhead expenses, including rent, utilities, advertising and salaries. Say the total is $5,000.
2. Determine the Gross Profit Margin. If a product is priced at $20, for example, and your cost to produce the product is $15, the gross profit is $5, or 25%.
3. Calculate monthly break-even sales. Total monthly overhead expenses ($5,000) divided by the gross profit margin (25%) equals total monthly sales needed to break even ($20,000). $5,000 ? 25% = $20,000
A unique program that provides $500 to $5,000 in loans to very small businesses is gaining support in Florida.
"Micro-loan" programs work like this: A non-profit community organization borrows money from banks, then loans the money in small increments to start-up business owners. As entrepreneurs repay the loans, the community organization pays the bank. As a dividend, the bank's loan satisfies the Community Reinvestment Act, which requires financial institutions to lend in poor neighborhoods.
Florida's most active micro-lending organization is Working Capital, a non-profit group in Miami with a $200,000 loan pool funded by eight banks. To get a loan, an entrepreneur must join a 4- to 8-member "peer lending group." The group reviews loan requests and is responsible for repayment of its members' loans.
Gov. Chiles will host a conference on micro-lending in Orlando in May. For information, call Glenda M. Wood 904/681-6555.
Cutting Defense Ties
Beginning this month, defense-dependent small businesses in Tampa Bay, Central Florida and Palm Beach County can get management support and training thanks to a $1.5 million, three-year contract from the U.S. Small Business Administration and matching grants by three of Enterprise Florida's Innovation Commercialization Centers. The programs will be run through Small Business Development Centers in each region. For details, call Enterprise Florida Innovation Partnership, 407/425-5313.