Help me start a small business

[KarefulKactus15]

Okay guys,
It seems everyone on here has a side hustle, and I've been soul searching for mine. I think I found it yesterday when I responded to an ad on craigslist. It was for a salon who's pedicure chair quit working. I have a  2 year degree in Electro-mechanical troubleshooting so I made short work of the issue.  But I found out 2 important things while I was there. I actually like the work, Its indoors and the systems aren't overly complicated or hard to work on and the more important part, according to the Salon owner there is high demand for general salon equipment repair.    She said there are no dealer techs in our area, in fact there is only one technician at all in our area and no one likes him. (Apparently he's been caught making up prices and charges labor that wasn't actually performed, also he doesn't seem all that bright because he frequently has to do callbacks)

So heres where I need mustachian advice. What do I do now? I would like to launch a small business of just myself specializing in salon equipment repair, anything under roof, tanning beds, pedicure chairs, basically anything that is not cost effective to throw away and replace.

I wish I could just go to all the salons in the area and give them a card and explain that Im new and will be happy to service their equipment for cheaper than anyone else. At least until I get established but I don't think thats legal at this time because :

1.) Im not a legitimate business, Im just me...
2.) I don't know how to handle liability issues, obviously I don't want something I touch to catch fire and burn down the place and kill 20 people and get personally sued (extreme situation for example)

I don't mind doing research, I don't expect you guys to hold my hand, but if someone could just tell me which corner of the internet to start in, that would be great! Some simple questions:

1.) How do I structure My business, LLC or Sole Proprietorship?
2.) How do I handle Liability, Umbrella policy or do I need to look into more specific coverage?
3.) Whats the best way to get this thing launched? I have a full time Job that pays well, but I enjoyed the work I did yesterday and the demand seems high. Also I definitely just want this to be a side gig at this time on my days off, or after I get off work. I can't imagine there ever being enough work to replace a full time job, but you never know....



Sorry for the long post, I will check back in periodically throughout the day. Any thoughts or direction is appreciated.

[Fishindude]

Cool deal !   Sounds like a great opportunity.

Some things I would do:

a. Create a business name.
b. Get some business cards made with your contact info and a couple brief bullet points explaining what you do, keep it simple.
c. My community wouldn't require a business license for this, but some might?   Your local chamber of commerce could probably point you in the right direction to get these questions answered.
d. You should have some insurance coverage in the event you damaged something or injured yourself or someone else while on someones site.  Businesses don't want uninsured people working at their places.
e. Shouldn't be hard to find all of the salons / shops in your area.  I'd just mail them all a letter with your card, explaining your services.  After that, stop in and hand off cards to salon owners when you drive by one, etc.

Good luck with this !

[Mongoose]

My personal opinion from starting a small business would be to talk to a lawyer or CPA about what setup would be best. Not knowing anything about starting a business I did both. The CPA was the second person I talked to and he wound up being way more helpful and less expensive. After you get the paperwork done, you also have a set amount of time before you have to show profit to avoid being considered a "hobby business" which may have tax implications. I was very happy to have a professional help figure it out.

As for the liability, you'd need to check with someone more knowledgeable but there is a "corporate veil" that is supposed to protect against personable liability when you own a business. Not sure how it works with the different types as I ended up setting up an S-corp.

We do have liability insurance as a company but it is for a small amount since we don't do work that has much/any liability. We got that coverage through an independent insurance agent who was very helpful at minimizing our costs by shopping around for us.

We have found that personal contact is the single best way to get clients interested in our services. A few responded to a flier or mailing but direct (call or in person) is much more effective.

Another suggestion is to find someone who does the work you are proposing who is far, far away from your location (I.e., someone you would never compete with) and asking about their setup. We had good luck getting insider opinions and finding out what was really working for an existing company that way. We used this mostly for ideas rather than to figure out exactly what to do...and combined it with advice from the other resources mentioned above.

Good luck!

[KarefulKactus15]

Good replies so far. I definitely like the idea about speaking with a CPA. I imagine they have seen my situation quite a few times and could provide excellent guidance for financial/tax structure.

[oldmannickels]

Reach out to your local SBA representative. They should be able to point you in the correct direction for your area.

[Axecleaver]

Sounds like a cool side hustle.

Doing what you describe sounds perfectly legal, but as you recognized, if you just show up and do the work, you are accepting personal liability for any damage you cause. Until your business is more successful, you may want to accept that risk. When you're ready to take the next step, you have two options (you can do both):

1. Set up an LLC, perform all the work under the LLC, and if you're ever sued, just cut the business loose and let it burn. Can be risky because you must follow the rules for LLC perfectly, or you can lose your immunity. Google "piercing the corporate veil" for more info. You can claim this income (and take lots of valid business deductions) on Schedule C.
2. Buy general liability and/or professional liability insurance. This is more expensive and a recurring cost, but will keep you out of trouble.

If you get to the point where you are hiring other people, you should also look into worker's compensation insurance. Screwing this up can expose you to huge fines and personal liability: it's one of the things that can pierce the corporate veil.
Your marketing idea sounds good, too.

[KarefulKactus15]

Wow I had never heard of a SBA rep.  But after a quick search for my area apparently they have one. Looks neat, they have little work shops and seminars and stuff. I will definitely be exploring that avenue. 

[MarciaB]

Reach out to your local SBA representative. They should be able to point you in the correct direction for your area.

I'm not sure what an "SBA representative" is but I've got a couple of excellent resources for you (related to the SBA).

First - find your local Small Business Development Center (https://www.sba.gov/tools/local-assistance/sbdc). There are about 1000 of them nationwide (I run one in Oregon) and they are a wealth of help and resources. Much of it free.

Along those lines you can also look for your local SCORE chapter (https://www.sba.gov/tools/local-assistance/score) for more free help.

Get a little help with this, it's a simple business concept and there's not a whole lot of complicating issues here. Insurance will be important to you, and some sort of legal structure (I'd recommend an LLC). WaveApps is a free online bookkeeping software I like a lot, and I help folks with this on a regular basis (meaning I provide free business advising to them as they work their finances on WaveApps...yes, free technical assistance).

You are doing the right thing in reaching out to ask some of these basic questions. Good luck!

[vagon]

You could always take the Uber path, and ignore regulations while just doing the work.
Seems wise to not spend a bunch of money on a hustle you're not even sure will bring in sufficient revenue yet.

[protostache]

1. Set up an LLC, perform all the work under the LLC, and if you're ever sued, just cut the business loose and let it burn. Can be risky because you must follow the rules for LLC perfectly, or you can lose your immunity. Google "piercing the corporate veil" for more info. You can claim this income (and take lots of valid business deductions) on Schedule C.

This is a super common misconception. An LLC protects you from financial liability. For example, you can't complete a contract for whatever reason, or if you default on a loan that you haven't personally guaranteed. It does not protect you from your torts (ex: burning down a building or injuring someone). To protect yourself from those things you need to buy professional liability and/or business owners insurance.

[KarefulKactus15]

The über path, lol.     I don't know for sure, but I feel like some people are gonna be in for a rude awaking one day.

[Axecleaver]

An LLC protects you from financial liability. [...] It does not protect you from your torts (ex: burning down a building or injuring someone).

Thanks Protostache, I learned something today. This link explains it pretty well.

http://www.litigationandtrial.com/2009/05/articles/attorney/automobile-accidents/can-i-set-up-an-llc-to-avoid-personal-liability-in-a-lawsuit/

To OP - ignore what I said about forming an LLC, looks like you really need liability insurance to protect yourself in your scenario.

[Hank Sinatra]

You could always take the Uber path, and ignore regulations while just doing the work.
Seems wise to not spend a bunch of money on a hustle you're not even sure will bring in sufficient revenue yet.

Along these lines and the "hobby business"  thing.  I haven't actually started anything yet but over the years have looked into this stuff.  The upshot of my investigation shows that unless I am  actually starting a real, full-up, no sh1t --business--  type of enterprise right out of the chute eg a new Walmart, a new fried chicken restaurant ec,   I would do it simply as a hobby at first to see where it's going. Saves on a lot of confusing crap on the front end and also allows me to test myself and my own motivation without over-complicating things.

Yes, I would pay taxes as "miscellaneous  income" or whatever it's called on the 1040. Then once I prove I am making steady bucks I can go full bore with the business paperwork.

I would also make sure I have insurance but I already have high liability limits and an umbrella  policy. Let the insurance co. know you are doing side-work and see what they say.

[Guesl982374]

My two (unqualified) cents:

-Get a federal tax id, don't bother with a LLC etc ... yet.
-Ask what the competition pays, charge the same amount but be more professional.
-Estimate how big the market is: Is this a once a year call on average from each salon? Is there routine maintenance that you can get a certain % of the existing business to pay for? It sounds like it's an underserved market but there is a chance there isn't much of a market to begin with which is why it hasn't attracted more qualified competitors.
-You are in your early twenties, and most likely do not have >$50-100K (hopefully I am wrong). If this is the case, do not worry about liability yet. If in the very low probability God forbid something happens and bankrupts you, you can quickly recover. If you are very polite and honest, this won't happen. If my assumption is wrong, then you have plenty of money to pay some to set up a LLC, for insurance, etc. Worst case you pay some small money (<$2K) to see if the business cashflows.

Good luck, it does sound promising.

[KarefulKactus15]

Im still finding the reply useful. Im posting this so it bumps back to the top.

[KarefulKactus15]

Well I ran into my first road block of being a small time repairman.     My main job.....   I work ina. Field where I work 12 hours a day for 7 days, then I'm off for 7 days then repeat.  So basically work 7 off 7 work 7 off.     What am I going to do if I get a customer urgent call on my working week, I simply don't have the time to work on their issue.    This really creates a huge hole in my customer service.   Ideas?

[worms]

I don't see that as a deal-breaker. Just be honest with your clients and get a reputation as the guy who is better but not always available at short notice.

Convince them that in a service business they generally only ever get two out of three: better, cheaper or quicker.  If you want good and cheap, you won't get quick. Cheap and quick, it won't be good.  Good and quick, it won't be cheap.

[KarefulKactus15]

I like your 3 legs of customer service lol

[Icecreamarsenal]

You'll have to file your business with your town and state. They will issue a tax id. A single person llc is considered a sole proprietorship. Taxes will pass through to your personal tax bracket. You can save much more pretax through solo ira.
This cost $500 in my town and was a one time charge.
Speak to an insurance agent about your insurance needs. When I started my business, I asked people in the same field about their insurance providers. That gave me a ballpark regarding what to expect. You can ask electricians or solo plumbers.
The best way to advertise is word of mouth and grassroots campaigns. Let them know you're the new guy in town. Show up on time, be professional, don't make multiple trips to Home Depot because you forgot something, work constantly and quietly until the job is done, turn your phone on silent.
Presto: you now have small business owners clamoring for your services. They will become legion. Keep it small enough so you don't have to subcontract or hire help.
Keep in mind it's your side hustle. Respect it, treat it like it represents the best you, instead of being given a list of tasks by your boss.

[NorCal]

My personal opinion is that you can probably do this as a sole proprietor without forming a business.  You would be lacking insurance, which is something you'd have to do the risk/reward analysis on. 

Talk to a CPA in your state if you're really going to get serious.  The cost of owning an LLC varies dramatically by state.  Per MMM's blogs, it costs $25/yr in CO.  Here in CA, it costs $800/yr.  You may also want to hire a professional to do your taxes (or not), which can get expensive fast.

[KarefulKactus15]

Thank you for both new post. Both were helpful

[Altons Bobs]

The TaxID Icecreamarsenal mentioned is for your state only.  If you're wanting a Federal Tax ID, you need to get one from the IRS, otherwise you'd be doing business with your SSN.

[KarefulKactus15]

I still need to pursue the insurance thing this week. Ive been reading about umbrella policies, errors and omission , and general liability.   Insurance cost could really break someone trying to just test the water. However the insurance seems like a necessary evil.

[KarefulKactus15]

Okay, after hours of reading, and talking to the SBA rep and reading the secretary of states page here is what I think I have figured out.   Its incredibly easy to start a sole proprietorship in my state. The secretary of state doesnt require registry of sole proprietorship, only LLCs and above, even if the sole proprietorship has a different name than the owners name . Also no use / sales tax on services rendered, so no registry for special state tax accounts.     I could have just grabbed some insurance, and started doing business and filed all state/federal income tax on my personal return.          However, for whatever reason, I decided to register for an IRS   EIN # to keep things separate, not sure if that was smart / stupid or what, but its done. I registered as sole proprietorship in the repair industry.      I think all thats is left is to tackle the insurance aspect, I need to consult with an agent to see what kind I should go with.             And finally after that I can do the part I look forward to most,  get out there and pursue this.

[Krolik]

Business insurance is a must even if you think it is very unlikely you might get sued.
Choose a business structure that will do the best job of separating you from your business. LLC is o.k. (but not bullet proof).

We run a tiny side business and got hit with 15MM lawsuit. If we didn't have business insurance we would not survive.  Good attorneys are expensive and you don't want to be stuck with 150K invoice. There are many bottom feeders out there who will sue to get $$$.

[KarefulKactus15]

15mm Lawsuit against a small company is terrifying.  And I definitely realize the need for insurance.  I can imagine if I fix a tanning bed, then some final destination shit happens, it wouldn't be good lol. So far my research suggest that I need errors and omission, and general liability. Im not sure on the coverage amounts yet but I will be looking into that. Does anyone have any other suggestions for insurance?   My main job will be entering someones place of business and repairing their equipment. Not sure what all liabilities that includes but I'm sure there are quite a few things that could wrong.

[Telecaster]

That's also why doing business as an LLC or S-corp is important.   

[KarefulKactus15]

Sorry to necro a thread. Just wanted to give an update.
I got my first insurance quote today,  7,500$ for 1 year    with an expected gross sales of 20k.

Do you know why its so high? Cause tanning beds cause cancer, and apparently as a technician working on tanning beds, I can be liable for that. Who woulda thought...

I also got a quote for 750 for 1 year without the cancer coverage. So if something I do can be linked to increasing someones risk of cancer, I'm screwed....   

What should I do now?  Ditch this small business all together? Not touch tanning beds?  Is there someone like a lawyer I should consult with?  Get more quotes? What would you guys do in my situation?   Im kinda disheartened. I was not expecting a number like $7,500 which obviously makes it cost prohibitive for me to do, especially as a side job.

[protostache]

Can't tell you what to do, obviously, but it sounds like it's definitely something you want to start.

Why not just start without tanning beds? They were just one of several different things you were going to offer services on anyway. After awhile, you may get enough demand for tanning beds that it will make sense to bump your insurance.

Also, have you looked to see what other people are charging for similar service? Maybe tanning bed service is just hellaciously expensive because of the insurance cost.

[Telecaster]

Can't tell you what to do, obviously, but it sounds like it's definitely something you want to start.

Why not just start without tanning beds? They were just one of several different things you were going to offer services on anyway. After awhile, you may get enough demand for tanning beds that it will make sense to bump your insurance.

Also, have you looked to see what other people are charging for similar service? Maybe tanning bed service is just hellaciously expensive because of the insurance cost.

Looks like good advice to me.  I encourage the OP to pursue this.   I delayed starting my biz for a long time because concerns/confusion about the paperwork.   And when I talk to people, that always seems to be the main hurdle before jumping off.   

[NorCal]

I would say either start without the tanning beds, or live with the risk.

If someone gets cancer from a tanning bed, would they even know you exist?

Yes it is a risk.  But it's a risk I'd probably take.

[KarefulKactus15]

Im getting more quotes tomorrow. I feel like 750$ is high for the work I want to do.  And I agree, I may not advertise the tanning bed stuff and focus on pedicure thrones, if I get the demand for beds, Ill come up with a risk management plan, but for startup I really want to keep cost low to test the waters. This insurance thing is by far my biggest / only cost lol. 

[protostache]

Im getting more quotes tomorrow. I feel like 750$ is high for the work I want to do.  And I agree, I may not advertise the tanning bed stuff and focus on pedicure thrones, if I get the demand for beds, Ill come up with a risk management plan, but for startup I really want to keep cost low to test the waters. This insurance thing is by far my biggest / only cost lol. 

I don't know much this kind of thing goes for, but let's say you can charge $30/hr. You'd need to do 25 hours of work over the entire year, or a little over two hours a month, to cover the expense of the insurance. In your OP you say you're looking to make $20,000 or more with this, just as a side gig. Seems worth it to me.

Honestly if this is your only startup cost you're in a pretty good position, and if it doesn't work out you should be able to get at least part of it back if you cancel the policy.

[KarefulKactus15]

I decided to do something that might make some of you cringe...  I was pursuing 1M/2M coverage.  I don't want to pay 750$ to sit around and realize there is no market. So I'm pulling quotes for 100k/200k.   Its not adequate but it is substantially better than nothing.  I will use this policy while I build the business and if I see it turn into anything reliable I will do a new policy with proper coverage. But I dont see any sense in carrying a 1M/2M for my first 1-2 months that may or may not have any clients.

[KarefulKactus15]

Still working on the business, 2 things have come up.   First, whats a good alternative to putting my home address on the business cards? Im based at home but I don't think a home address looks good.   Im making new business cards anyway.   Generation 1 business card has my home address, doesn't have my website,  and the biggest reason:   Im adding " Call,Text or Email"   My business phone accepts text messages, but the clients I deal with are textaholics so I want to make sure its on my card. Thats been a repeat topic already so I think that needs clarification.     

Also my new biggest fear : More demand then I can manage...      Ive been continuing to search for competitors and identify potential clients. On a google search, I can't find a competitor within 100 miles, but I can identify 500 potential customers in a 30 mile radius.( All I plan to cover at this time) 


So recap, whats a good alternative to address on a business card?   Po box? Rent a box from UPS store? Virtual office?    Also there are a few small businesses by my house, I thought about dropping in and seeing if they would charge me a fee to use their address. ( I don't actually plan to get any mail) 

[terran]

Still working on the business, 2 things have come up.   First, whats a good alternative to putting my home address on the business cards? Im based at home but I don't think a home address looks good.   Im making new business cards anyway.   Generation 1 business card has my home address, doesn't have my website,  and the biggest reason:   Im adding " Call,Text or Email"   My business phone accepts text messages, but the clients I deal with are textaholics so I want to make sure its on my card. Thats been a repeat topic already so I think that needs clarification.   

I've seen lots of business cards without an address, so I think that would be fine unless your customers need to come to your place of business in which case the cat will be out of the bag. If you want an address, then what about your address would be a dead giveaway that it's a residence not a business? A PO box would be a fine solution if you don't want customers to have your home address, although I think there are also commercial (non USPS) solutions that sound more like a legit office, not like you just have a mailbox somewhere.
   

Also my new biggest fear : More demand then I can manage...      Ive been continuing to search for competitors and identify potential clients. On a google search, I can't find a competitor within 100 miles, but I can identify 500 potential customers in a 30 mile radius.( All I plan to cover at this time) 

Ha, don't worry about it. This is rarely the problem, and if it is you can raise your rates until it's not or hire people to help out. If there really are that many customers and no competitors you have to wonder why. Nature (and business) hates a vacuum, so clearly these businesses have some alternative to how they're currently filling this need. Not trying to be discouraging, just saying that too much business is the absolute last thing you need to worry about because it has many easy and lucrative solutions.

[lakemom]

Just Put

Joe Mechanic
Hometown, State
Phone
call, text or email

no need for a street address and use a PO Box for invoices.

[KarefulKactus15]

I like just putting the hometown idea, Also I will look into a simple PO box.  I don't so much mind having my home address, but on some entrepreneur websites, they listed that as a safety concern / harassment issue. Same thing with using your personal cell phone # for a business card. 

Also no discouragement. I agree, I'm sure there is a reason I cant find any competition. I'm also sure ill soon find out why. But either way, whatever happens I can say that I tried something new and gave it my all.

[Telecaster]

I like just putting the hometown idea, Also I will look into a simple PO box.  I don't so much mind having my home address, but on some entrepreneur websites, they listed that as a safety concern / harassment issue. Same thing with using your personal cell phone # for a business card. 

Also no discouragement. I agree, I'm sure there is a reason I cant find any competition. I'm also sure ill soon find out why. But either way, whatever happens I can say that I tried something new and gave it my all.

Some entrepreneur websites give spectacularly shitty advice.  Whoever is handing out advice like that needs to be kicked right in the nuts. 

Put yourself in a client's, or potential client's shoes for a moment.   The purpose of a business card is provide contact information.  Like if they want to send you a check or something.  Maybe a vendor wants to ship you some parts or samples, how are they going to do that without an address?     Goes triple for the cell phone number.  Why on Odin's green earth would you not make it as easily as humanly possible for your client to contact you?  If a potential client can't get a hold of you, they will simply call the next person their list.    If you are Donald Trump it is okay for your secretary to take your calls.    If you are a repairman just starting out, you damn well want to make sure a client or potential client can call you when they need you.   

Question:  Is this theoretical safety concern, or is this something actually happens?  I'm willing to bet none of the advice givers have ever actually heard of such a thing happening.  Possible sure, but lots of things are possible.    I've used my home address and personal cell phone for my business for over a decade, never had a problem.  If someone wants to harass you at home, there is a thing called Google and they can use it to track you right down. 

I'll wager that 99% of your clients don't care if the send checks to a home address, but I agree a PO Box would look slightly more professional.  But try this instead: 

Business Name
Home Address, Suite 200
City, State, Zip

You don't actually need a Suite 200.  Just put a note on your mailbox with the names of the people/businesses receiving mail at that address.   The Post Office wants you to do that anyway. 

[terran]

Also no discouragement. I agree, I'm sure there is a reason I cant find any competition. I'm also sure ill soon find out why. But either way, whatever happens I can say that I tried something new and gave it my all.

Amen. And hopefully you WILL have the problem of "too much" business (but there really is no such thing -- just too low prices).

[KarefulKactus15]

Telecaster, fantastic idea.   I like the suite # idea.  Honestly a PO box is a waste of money IMO for my needs. And I dont mind looking like a small business, with a home address. That is what I am, after all.