Life Advice

                                About...

                        Running a Small Business
                                  1996



People acquire small businesses in many ways, but all are faced with one
common challenge: taking charge of everything involved in running a
business. Running a small business involves many activities, including
developing a business plan, overseeing sales and marketing, dealing with
personnel and a whole range of administrative responsibilities.

While the list of tasks seems daunting, even overwhelming, you can start
by breaking the job into its components. By reviewing some of the main
pieces, you may find it more manageable.

This Life Advice material about Running a Small Business was produced by
the MetLife Consumer Education Center, cosponsored by the U.S. Small
Business Administration and reviewed by the Internal Revenue Service.
Editorial services provided by Meredith Custom Publishing.


Your Business Plan

Building your small business into a viable competitor in the marketplace
takes skill and dedication. Having a plan for growth--a business
plan--will help you focus your efforts. But remember that a business
plan is not a stagnant thing. As your business grows and the world
around your business changes, you should modify your business plan. Here
are the basic steps for doing that:

1. Redefine your business and its ultimate objectives in light of the
   current business climate. Have significant changes taken place in
   your industry or in the economy since you first wrote the plan
   (inflation, recession, changing interest rates)? That could be a
   signal for reevaluation and redefinition.

2. Communicate your goals to key employees and advisors such as your
   banker or accountant whose help you need to realize your objectives.
   Use their feedback to update or change parts of your business plan.

3. Formulate the most likely picture of your company's future using the
   available data (financial records, newspapers, magazines, government
   reports, surveys, your own observations and those of your
   colleagues). This is your business forecast. One likely outcome of
   this process is that you'll identify trends that may affect demand
   for your product or service or point to product improvements or even
   new areas of business. Incorporate these anticipated changes into
   your business plan.

4. Assess your resources for achieving these newly defined objectives.
   Take stock of your assets -- those that show up on a balance sheet
   and those that don't.

    *   Do you have the money, inventory and equipment required to
        achieve your objectives?

    *   Do you have the technical knowledge, staff and commitment to
        execute those objectives?

    *   If not, will you be able to obtain the needed resources?

5. Set intermediate goals and a schedule for accomplishing objectives.
   Outlining a chain of events will help you measure your progress
   toward your goal.

By taking the time to define your objectives and map out a strategy for
achieving them, you will be in a better position to take advantage of
opportunities as they arise. Also, rather than being forced to react to
change, you will be better prepared to anticipate change and respond in
the best manner.

Sales and Marketing

Making potential customers aware of your product or service and giving
them easy access to it are key to your success. To ensure that your
small business is fully realizing its sales potential and not missing
out on a good opportunity, look both to the past and the future. Looking
to the past helps you determine your business strengths and weaknesses.
Looking to the future lets you anticipate changes in customer demand on
which you can capitalize.

One of the greatest needs of small business owners today is for accurate
information on which to base marketing decisions. Answers to these types
of questions will help you profit from new business opportunities:

*  Who are your customers?
*  Where are they?
*  Why do they buy?
*  What do they buy?
*  Is the demand for your product rising or falling?
*  Who is your competition?
*  What effect does the economy have on your business?
*  What new customers and markets can you reach?


What small business owners often fail to realize is that most of the
needed information is already in their possession or can be readily
obtained. Business records, salespeople, customers, suppliers, trade
associations, government and the media can provide mountains of
important information.

Business Records. In addition to monitoring your business's income
statement and balance sheet, check on sales receipts and expenses by
product line. This not only permits you to determine your sales level,
but also lets you look for trends. Do some products move quickly, others
not at all? Are certain colors or styles more in demand than they were
last year? Are selling costs for a particular item rising faster than
the profits it generates? Use this information to project sales, plan
inventory and estimate profits.

Salespeople. Along with your sales records, your salespeople are
excellent sources of marketing information. They probably have more
direct contact with customers on a regular basis than anyone else in
your company. From their vantage point, salespeople identify customer
needs and see emerging trends in the business.

Customers. In addition to your customers' buying patterns, you want to
know how satisfied they are with your product and also determine their
future needs. Past behavior is not necessarily the surest way to predict
future behavior. Asking customers what you want to know through surveys
or questionnaires is one way to gather information.

Suppliers. Don't hesitate to talk to your suppliers about market changes
or developments. A good supplier often will do more than just fill your
orders on time. Suppliers should keep an eye on their industry so they
can help business owners make smart purchasing decisions.

Trade Associations. Becoming involved with a trade association can give
you access to marketing information in a variety of areas related to
your business. Trade associations often provide forecasts of demand
levels and industry trends. They also may do cost studies and related
research that can help you assess your place in the market.
Participating in these groups is an excellent way to meet people in your
industry, potential customers and other business contacts.

Government. Many government agencies can supply you with market research
data at the federal, state and local levels for little or no cost. The
Department of Commerce, Federal Trade Commission, Internal Revenue
Service (IRS) and Small Business Administration (SBA) are just a few of
the government agencies that track business information you can request.
These agencies produce reports on all aspects of the economy, including
population statistics, sales trends, building activity, etc.

The Media. Keeping up with today's world helps you spot the trends of
tomorrow. Unfortunately, successful small business owners often become
so involved in their day-to-day operations that they block out the
outside world. Don't let that happen to you. Stay current with the
issues of the day. You may find information to help you resolve a
current problem or point your business in a new direction.

Finding Business Advisors

It's just about impossible to run a small business all by yourself. Even
if there were enough hours in the day, you'd have to be an expert in
many fields. The smart small business owner recognizes the need for
specialized help and seeks out the best professionals to provide it.

When running a business, your natural inclination is to try to save
money any way you can. But it's unwise to avoid getting good legal
advice when you need it. A good small business attorney can help protect
you and your business from legal troubles involving licensing,
employees, vendors and customers. A good attorney can also help when
you're looking for investors or dealing with bankers. Word-of-mouth is
one way to identify potential candidates. Ask other small business
owners if they would recommend their own attorneys. You also can check
with the local bar association or look through legal directories in the
reference area of your public library.

When interviewing a prospective attorney, be sure to ask what other
types of small businesses the attorney represents and how long he or she
has been practicing law. Get the names and phone numbers of several
references, and check them out. Finally, check with the state bar
association to make sure the attorney is a member and is licensed to
practice law in the state where your small business is located.

Remember, your attorney needs all the pertinent information about your
business to best serve your legal needs. So when you hire one, be honest
and tell him or her all the facts--good and bad--about your business.

As your small business grows, you may need to retain a payroll service
and an accountant to keep your books in order and to keep current with
IRS regulations. Again, ask other small business owners for
recommendations. If you have an attorney, he or she may have
suggestions.

Retain someone who is compatible with your management style, as well as
someone who is good with numbers. And be sure to use this professional
wisely. Accountants don't just prepare income tax returns, they help
with tax planning and financial reports and provide assistance in
securing business loans.

To maximize the assistance you get from your accountant, be sure to
discuss your plans and objectives and explain clearly what you expect
from the accountant's services. Keep good financial records, and keep
your accountant posted on changes and new directions in your business.

Taking On A Partner

A partnership is an association of two or more persons as co-owners of a
business-for-profit. Creating a solid business partnership is hard work,
but if you choose partners who complement your strengths, the business
may benefit.

It's a good idea to have an attorney help set up a partnership agreement
that spells out exactly what is expected of each partner. The agreement
should describe the role of each partner; indicate who contributes
money, property, skill or labor to the partnership; define how much each
partner contributes; and specify what happens when the partnership ends.
The agreement should also indicate how income, gain, loss, deductions or
credits will be split between the partners and who will make specific
kinds of decisions.  Keep in mind that partnerships can have a downside.
Partners may be liable not only for their own debts but also those
incurred on behalf of the partnership.

To help build a strong partnership:

*  Communicate openly and honestly with your partners.

*  Set up a trial period to see how well you work together.

*  Specify the percentage of ownership each person will have.

*  Define who will contribute cash, property or expertise.

*  Prepare a business plan and financial forecast for the life of the
   partnership.

*  Determine who will provide additional cash if it's needed.

*  Provide a method for removing a partner who fails to meet his or her
   obligations.

*  Define how, when and in what order profits will be allocated to
   partners.

Whenever you share important functions with a partner or other key
employee, you're turning over a key part of your business. If something
happens to one of you, it can have a serious impact on your business.
Obtaining 'key person' insurance coverage is one way to financially
protect a company if one of the covered key employees should become
disabled or die. Talk to an insurance agent to find out more about this
kind of coverage.

Personnel Matters

One measure of a successful small business is its ability to hire the
right employees. As a small business owner, the responsibility for
personnel matters falls on your shoulders. Before you even advertise an
opening, sit down and write a complete job description for the position.
It will help you create your ad and will give you a useful yardstick for
measuring the qualifications of those who apply.

Keep in mind that there are many federal and state regulations designed
to protect the rights of potential employees. To help avoid violating
antidiscrimination laws: *  Advertise job openings in widely read
newspapers so they come to the attention of many people. *  Carefully
define the skills, education and other qualities that are necessary to
perform the job so you don't unnecessarily exclude competent applicants.
*  Avoid screening procedures that have an unfair impact on any group of
applicants.

Once you've hired good employees for your business, you'll want to work
at building a loyal work force. It may take more than good pay to keep
employees pleased and productive. Here are some of the additional things
most employees want in a job:

*  A pleasant work environment.
*  The knowledge that they are contributing to the work of the company.
*  An opportunity for advancement and recognition of a job well done.
*  Comparable pay for comparable work.
*  Fair treatment.

If you are unable to reward employees with more pay, consider other ways
to recognize their contributions. Give employees a bonus day off, treat
them to a lunch or dinner or offer some sort of special recognition such
as an "employee of the month" designation. And don't overlook
the importance of an occasional pat on the back, along with a 'job well
done.'

In spite of your best efforts at hiring, screening and motivating
employees, you probably will have to fire someone at some point. But
firing an employee, even someone who is incompetent, can be risky. Angry
employees in some locations have taken to suing employers for wrongful
termination, and there have been many cases where the courts have sided
with the employee. Make sure you have legitimate business reasons for
firing someone--reasons you have carefully thought out and documented.
Be sure the standards you are applying are fair and consistent and do
not discriminate. They also should be easily understood and clearly
communicated to the employee.

Some of the reasons that may support a firing include:

*  Performing poorly on the job
*  Refusing to follow directions
*  Violating company policy
*  Being dishonest
*  Using drugs and alcohol in the workplace
*  Divulging company trade secrets to outsiders

The legal considerations surrounding termination can be complex. To be
on the safe side, you may want to consult your attorney before taking
action against any employee.

Patents, Trademarks, Copyrights, and Property Issues

If all or part of what your company sells is unique, you'll want to
protect these special features before you introduce your product or
service.

*  Patents grant your company exclusive right to an invention for a set
   time period. If you have a new or improved product--the proverbial
   better mousetrap--you'd be wise to talk to a patent attorney before
   you produce and sell the product.

*  Trademarks (noted by the symbol TM next to a company or product name)
   are used to distinguish the products of a company.  A trademark may
   prevent other companies from selling a product similar to yours with
   a name that could be mistaken for your company's name.  Similarly,
   service marks (SM) are issued to protect services.  Trademarks and
   service marks can be issued by a state or federal government.

*  Copyright protection subsists in original works of authorship fixed
   in any tangible medium of expression. For example, books, magazines,
   software programs and even television broadcasts can be protected by
   copyright. At the very least, important documents published by your
   company (sales pieces, manuals and the like) should be marked by a
   copyright symbol, © or the word, "Copyright" followed by the
   year, company name and the words, "All rights reserved" for worldwide
   copyright protection. In no case does copyright protection for an
   original work of authorship extend to any idea, procedure, system,
   method of operation, concept, principle, or discovery, regardless of
   the form in which it is described, explained, illustrated, or
   embodied in such work. For additional information and forms to
   register your copyright, contact the Register of Copyrights, Library
   of Congress, Washington, DC 20559, 202-707-3000.


Property Issues

If you are just starting or are expanding your business, you'll need to
look for a location for the business and the machinery, tools and other
capital equipment required to produce your product or service. Whether
you are leasing or buying space, you'll want to negotiate the best terms
possible. Make a list of your requirements before looking for a new
property. Some of the concerns to consider include these:

*  Zoning. Is that ideal location you've found zoned for your business
   activity?

*  Adequate power. Be sure the facility can handle your manufacturing
   equipment needs or even your office equipment.

*  Signage. Do you need a sign out in front of your business to help
   your customers and suppliers find you? Make sure local laws permit
   you to erect the sign you want.

*  Improvements. If you're leasing space, make sure any needed
   improvements will not violate the terms of the lease. For major
   changes, specify who will make and pay for the changes prior to
   signing a lease.

*  Maintenance and repair. From clearing snow to making sure the air
   conditioner runs, you'll need to make arrangements for building
   maintenance, depending on your lease. If there is shared space in a
   leased facility (eating areas, meeting rooms, bathrooms), make sure
   maintenance in these areas is also covered.


If you're expanding your business, you may be in no financial condition
to buy new equipment, so leasing can be a wise choice. In fact, some
manufacturers and providers lease equipment at such attractive rates
that buying may not even be necessary. Be sure you understand the
terms--rates, maintenance, renewals, etc.--before you sign.

Financial Concerns

One of the major concerns facing business owners is access to adequate
financing. Many owners launch their businesses with personal resources,
so they may not establish credit when they open a business. Only after
the business has grown do many owners try to establish credit.

Fortunately, there are sources of financing. The banking industry, the
SBA and private individuals are important sources for working capital.
The SBA is eager to help, but its funds are limited. Having a written
proposal is one of the best ways to improve your chances of securing a
loan. A loan proposal should contain the following information:

*  General information about the business, such as the company name,
   names and Social Security numbers of the principal employees, the
   purpose of the loan and the amount needed.

*  Business description that includes the history and nature of your
   business, as well as the age of the business, number of employees and
   current assets.

*  Management profile on each principal in your business, detailing
   education, experience, skills and accomplishments.

*  Market information that defines your products as well as your market
   and competition and a customer profile that explains how your
   business satisfies their needs.

*  Financial statements such as balance sheets, income statements for
   the past three years, a personal financial statement and collateral
   that will be used as security for the loan.


Special Concerns

Many small businesses start out in the home. If you have a home-based
business, it's usually a one-person operation, and the work performed
can be anything from accounting to writing. Working at home, however,
usually succeeds only if you are a highly motivated self-starter. Are
you disciplined enough to establish a regular work schedule and stick to
it? If you work out of your home, don't let other obligations interfere
with business. Housework, yard work and other distractions may make it
easy to neglect work.

Also, ask yourself if you will mind the solitude of working from home.
It can be lonely, and if you're a "people person," you may
find it difficult to be productive at home. You can try to overcome this
problem by getting out each day to visit clients or customers and by
staying active in professional organizations. There's an added benefit:
These organizations often provide good opportunities to network and may
yield new contacts or clients.

Certain expenses for a home-based business may be tax-deductible. If
your home office meets certain IRS requirements, you may be able to
deduct a portion of your mortgage interest, utilities, property taxes
and insurance as business expenses. To qualify, the home office
generally must be set aside exclusively for the business. Tax rules in
this area are constantly changing, so consult your accountant or tax
advisor for details.

Special Concerns of Family-Owned Businesses

Passing the business from one generation to the next is a special
concern for family-owned businesses. Succession problems usually can be
solved with open communication and expert help. Start by sitting down
with family members to discuss the future of the business. It's
important to create a plan that members of the next generation can agree
upon, assuming they are interested in carrying on the business. If
they're not, you'll need to prepare to sell the business to an outsider
when you decide to retire.

You and your spouse should have updated wills that clearly state your
intent to have the business stay in the family. Create an
estate-planning team that includes experienced people you can trust to
ensure a smooth transition.

Running your own business is a demanding but rewarding adventure that
can yield financial success and a greater sense of accomplishment and
contentment than you ever had working for someone else. Use the
information in this booklet to help bring continued success to your very
own business.

For More Information
Reference Materials

The Legal Guide for Starting & Running a Small Business
Fred S. Steingold, Nolo Press	$24.95
Life Advice price $18.95
Plus $2 for shipping and handling. Call 1-800-846-9455 to order.

The Entrepreneur Magazine Small Business Advisor (IBSN #1-109894)
John Wiley & Sons, Inc.	$19.95
Life Advice price $15.96
Call 1-800-879-4539 and mention promotion number 6-4338 to receive the
discounted price. Shipping and handling costs will vary. Ask a customer
service representative for details.

Building a Profitable Business: The Proven, Step-by-Step Guide to
Starting and Running Your Own Business By Greg Straughn and Charles
Chickadel Bob Adams, Inc.	$15.95

Homemade Money: How to Select, Start, Manage, Market and Multiply the
Profits of a Business at Home By Barbara Brabec; Betterway Books
$19.95

Pamphlets from the federal government

The quarterly Consumer Information Center Catalog lists more than 200
helpful federal publications. For your free copy write Consumer
Information Catalog, Pueblo, CO 81009, call 719-948-4000 or find the
catalog on the Net (http://www.pueblo.gsa.gov).

Related Life Advice pamphlets

See other Life Advice pamphlets on related topics: Starting a Business
and Selling a Business. To order, call 1-800-MetLife.


Copyright 1996 Metropolitan Life Insurance CompanyAll Rights Reserved


PEANUTS Copyright United Feature Syndicate, Inc.
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