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GUIDE TO STARTING A BUSINESS IN BLANCO COUNTY TEXASby George Cofran, BS, MBA
Updated December 2015
starting a business in Blanco County, Texas.
This guide covers the forms of business organization, formation, licenses, rules, regulations, taxes, and many resources on the web and elsewhere to expedite your start-up process and help you on your way to success.
While specifically targeted to Blanco County, much of this material applies everywhere in Texas and across the US.
Best of luck and congratulations on your new business venture!
CITY LICENSES & LOCAL RULES & REGULATIONS: With the following exception, there are no city licenses required in Blanco County. There are rules and regulations on certain businesses, such as food and health related businesses and other services, and for new building construction & building alterations.
SIGN ORDINANCE & BUILDING PERMITS: Blanco: $5 permit is required. Johnson City: $275
Here are the city offices to contact:
City of Blanco: Clerks Office, City Hall: 830-833-4525. 300 Pecan Street, Blanco, TX 78606. Contact: Bobby Mowery, City Secretary. No web site.
City of Johnson City: 830-868-7111. Fax: 830-868-7718; POB 369, 303 E. Pecan Drive, Johnson City, TX 78636. Contacts: David Dockery, City Administrator. www.cityofjohnsoncity.info. Rules & regs for building permits are described on this web site.
Inspections are conducted for: construction within city limits, restaurants, etc. See Blanco County, County Inspector: 830-868-2117.
TEXAS STATE & FEDERAL LICENSES, PERMITS, REGISTRATIONS, RULES & REGULATIONS:
Review this list to see what is applicable to your business: www.texasonline.com/category.jsp?language=eng&categoryId=9
Texas Alcohol & Beverage Commission: www.tabc.state.tx.us, 512-206-3333, for beer, wine, liquor licenses.
National government standards of health and safe practices apply to some industries, and private or professional association guidelines extend to others. The Occupational Health and Safety Administration at www.osha.gov/oshstats/std1.html sets standards for different industries and for firms of a certain size.
Private member associations, such as the American Bar Association, American Medical Association, Association of Certified Public Accountants, etc., also regulate their practitioners.
Numerous laws and regulations relating to employment are described below.
TEXAS STATE SALES TAX: Most goods and services are taxable when sold at the retail level. Contact the State of Texas Comptroller's Office, Sales Tax Division to determine which items and services you sell require you to collect sales tax. Your store location determines which sales tax "components" are chargeable. The components include city, county, state, transit authority and special purpose tax districts (SPD). In Blanco County, we don't have transit authorities, but we do have SPDs. Technically, this is called a "sales and use tax". Lodging establishments must collect a "Texas Hotel Occupancy Tax", which is set-up almost identically to the above sales tax (& rates), although with a different account number and report form. Together, we refer to them as "sales tax".
If you are required to collect sales tax, you must obtain a Sales Tax Permit, which is essentially just a registration with the Comptroller's office. You can register for this permit by mail, in person or on-line at Texas Online Tax Registration Application.
www.window.state.tx.us: Comptroller of Public Accounts, 1-800-252-5555
www.window.state.tx.us/taxinfo/sales: Sales tax information (rates, forms, FAQs, etc.) within the above site.
www.window.state.tx.us/taxinfo/sales/new_business.html: Information for new businesses and buying an existing business.
Sales Tax Rates: State: .0625 (6.25%); Blanco County (Local Code: 4016002): .0005 (.5%); City of Blanco and City of Johnson City: .015 (1.5%). No other cities in Blanco County collect city sales tax.
Certain parts of Blanco and Johnson City have SPD's as shown below. The total maximum combined rate of 8.25% remains in effect for businesses in these SPD jurisdictions.
Blanco County North Library District: 5016510, 1/2%, 04/01/03
The Blanco County North Library District is located in the northern portion of Blanco County, which has a county sales and use tax. The City of Round Mountain is located entirely within the Blanco County North Library District. The Blanco County North Library District includes only a small portion of Johnson City. Sales in this unique area must be reported using the combined area local code of 6016609. The unincorporated areas of Blanco County in ZIP Codes 78620, 78635, 78636, 78654, 78663, 78669, and 78671 are partially located within the Blanco County North Library District. Contact the district representative at 830/868-4469 for additional boundary information.
Blanco County South Library District: 5016501, 1/2%, 07/01/02
The Blanco County South Library District is located in the southern portion of Blanco County, which has a county sales and use tax. The Blanco County South Library District includes only a small portion of the City of Blanco. Sales in this unique area must be reported using the combined area local code of 6016618. The unincorporated areas of Blanco County in ZIP Codes 78027, 78070, 78606, 78620, and 78736 are partially located within the Blanco County South Library District. Contact the district representative at 830-833-4280 for additional boundary information.
The tax rate displayed is the tax rate that applies if you purchased and took possession of a taxable item or service in the specific location above. Different rules apply if the item was shipped or if the service was performed outside the location. There are special codes required to be used in reporting that are dependent on the exact location of your business. Call the number above for clarification.
You must collect this tax on behalf of the Comptroller's office, and submit the tax money and report on a regularly scheduled basis (when you must submit depends on tax volume, most are monthly). Be careful to not think this collected tax is your money. You must be prepared to submit the tax when due and this process is very closely monitored with heavy consequences for not complying.
TEXAS STATE FRANCHISE TAX: The Texas franchise tax is a privilege tax imposed on each taxable entity chartered/organized in Texas or doing business in Texas. Annual reporting requirement.
Taxable entities with revenues of $300,000 or less owe no tax. Taxable entities with tax due of less than $1,000 owe no tax. However, all taxable entities, including those that owe no tax, must file a report.
Contact the State of Texas Comptroller's Office, 1-800-252-1381, www.sos.state.tx.us/corp/tax.shtml. You must establish an "account" with identification of business address, officers, directors, agents, phone numbers, etc.
FEDERAL INCOME TAX: Regardless of your form of organization, you will need to file an IRS tax return each year for your business activities. There are different tax forms that are used for different forms of business organization. See www.irs.com and www.irs.ustreas.gov. See "corporation" below.
EMPLOYEES, LABOR LAWS & EMPLOYMENT TAX: As an employer, you must withhold federal income, social security and unemployment taxes from the wages of employees, and deposit these taxes and file reports with the IRS. The TIN number described below is your account number. You can make deposits manually or by automatic transfer from your bank account. See IRS web site referenced above.
A common area of confusion and problems is differentiating between what is an employee and what is an independent contractor. Be very careful in making these arrangements as the IRS leans towards viewing relationships as employment wherein you as the business owner must withhold money and report to the IRS.
Companies must also display publicly the basic business laws setting relationships between employer and employee. Public displays should include provisions relating to minimum wage, family leave, equal opportunity, polygraph, and migrant workers. Federal Contractors should, in addition, display rules about construction work (the Davis Bacon Act) and service contracts (the Walsh Healey Act). See www.dol.gov/osbp/sbrefa/poster/main.htm
You can read a more complete list of rules beyond the displayed fundamental rights at the U.S. Department of Labor www.dol.gov/dol/regs/main.htm.
Other divisions of the Labor Department may, in addition, focus on specific issues: www.dol.gov/dol/audience/aud-employers.htm.
The US Social Security Administration describes the obligation of employers (www.ssa.gov/employer/erii2b.htm) and benefits to employees (www.ssa.gov/understanding.htm).
Texas Workforce Commission (TWC) and US Department of Labor (DOL) and other federal and state employment requirements and helpful information are available at: www.twc.state.tx.us. Required posters to display are at: www.twc.state.tx.us/ui/lablaw/posters.html
Some employers must contribute to the state unemployment insurance fund: www.twc.state.tx.us/customers/bemp/bempsub3.html.
LEGAL FORM OF BUSINESS ORGANIZATION: The legal form of business (legal structure) defines ownership of the enterprise and liability for its actions. The nature of your business organization should depend on a number of factors unique to your circumstances, and should take into account taxes, liability, management, continuity, transferability of ownership interests, and formality of operation. There are legal and business considerations. You should research this carefully and consider using professional assistance in making your decision.
See www.business.texasonline.com/guide/businessstructure.jsp?lang=en for help in understanding the various forms of organization.
If you do not incorporate, and if you do not call the business by your personal name, then the enterprise name should be registered at the nearest County Clerk's office by filing for an Assumed Name Certificate, which records the company name as the "assumed name" or DBA and refers to the person "doing business as... ".
See: Blanco County, Clerk's Office: 830-868-7357. Karen Newman: Courthouse Annex, POB 65, Johnson City, TX 78636.
If a corporation, LLC, or LP does business under a name other than the legal name in its Certificate of Formation, it must file Assumed Name Certificates with the Secretary of State and the county or counties where its registered office and principal office are located.
Some forms of organization require filings and actions with the Texas Secretary of State (SOS). See www.sos.state.tx.us at 512-463-5555. SOSDirect for on-line filings is at www.sos.state.tx.us/corp/sosda/index.shtml.
Corporations of all types must file an annual Texas Franchise Tax Report and a Public Information Report (PIR) that lists the names of officers and directors at the time the report is filed.
Sole Proprietorship: Single business owner, not incorporated, revenue and expense reported on personal tax return, no liability protection. An individual may choose to operate in this most simple form as a single owner. If you do not call the business by your personal name, then the enterprise name should be registered at the nearest County Clerk's office, which records the company name as the "assumed name" or DBA and refers to the person "doing business as . . . ".
Partnership: Two or more owners, with some agreed upon participation of the partners in the business in terms of ownership and other aspects, revenue and expense reported on the personal tax returns of the partners, no liability protection although the structure may be defined as limit liability for some partner classifications. If the business has more than one owner, they may decide upon a partnership. The owners can share assets and liabilities equally, or in various proportions. A partnership agreement will stipulate the terms. Some investors may want to separate their personal property from the business assets. They can become Limited Partners. Limited partnerships are required to file organizational documents with the SOS. Other investors may bear full personal liability for the business. They are General Partners. General and limited partnerships may opt to register as limited liability partnerships in order to limit liability, but are not required to do so.
Limited Partnership: A Texas limited partnership is a partnership formed by two or more persons and having one or more general partners and one or more limited partners. The limited partnership operates in accordance with a partnership agreement, written or oral, of the partners as to the affairs of the limited partnership and the conduct of its business. While the partnership agreement is not filed for public record, the limited partnership must file a certificate of formation with the Texas Secretary of State. The Secretary of State provides a form that meets minimum state law requirements. Online filing of the certificate of formation is provided through SOSDirect.
Limited Liability Partnership (LLP): In order to limit the liability of its general partners, a general or limited partnership may opt to register as a limited liability partnership. The Secretary of State provides a form for registration as a limited liability partnership. Online filing of the registration is provided through SOSDirect.
Corporation: A legal entity recognized by the state and the IRS, wherein ownership is established on the basis of stock. Tax reporting is done as a corporation and not on a personal basis. Some liability protection to the owners is offered in this form of business. A Texas corporation is created by filing a certificate of formation with the Texas Secretary of State. The Secretary of State provides a form that meets minimum state law requirements. Online filing of a certificate of formation is provided through SOSDirect. The IRS calls this a "C" corporation, but also allows alternate forms of corporation structure for tax purposes, including "Sub-chapter S" corporations, which are popular, wherein the revenue and expense are reported to the owners who in turn report it on their personal tax returns (much like as in a partnership), while still allowing the same degree of liability protection.
A corporation can have one or many owners, whose personal liability is limited to their investment in the enterprise. Ordinarily, creditors have no claim to the personal assets of corporate owners in the absence of fraud or other types of wrongdoing. An entity must file articles of incorporation with the SOS and perform other steps in order to become incorporated.
You will need to file with the IRS for a Employer Tax Identification Number (EIN) which is then used in all reporting and correspondence with the IRS, and you need this even if you do not have employees. An IRS application form (SS-4) and instructions for acquiring an EIN at www.irs.ustreas.gov.
Limited Liability Company (LLC): The LLC offers the same personal liability protection as a corporation, but with fewer of the corporate formalities. They typically are not required to hold formal meetings or keep detailed corporate minutes. LLCs also offer great tax flexibility. Members can choose to be taxed as either a traditional corporation or as a "pass-through" entity. A Texas limited liability company is created by filing a certificate of formation with the Texas Secretary of State. The Secretary of State provides a form that meets minimum state law requirements. Online filing of a certificate of formation is provided through SOSDirect.
SELECTING YOUR BUSINESS NAME: You must give your business a name. If you want to incorporate in Texas, you must file the application with the Secretary of State. Your name must be sufficiently different (unique) to be accepted by the SOS. Once this is done, you can register your business name with the IRS and obtain the EIN described above. You may want to register your business name and any "doing business as" (DBA) names with the County Clerk as well, especially if you are not incorporating your business and if you want to protect the business name so that someone else can not legally use it.
OTHER LOCAL BLANCO COUNTY BUSINESS RESOURCES: There are some additional local resources to assist you with making arrangements and getting started in town.
OUT-OF-TOWN DELIVERY SERVICES: There are unattended drop boxes as follows:
Fed Ex: Envelope drop box at Corner of Nugent and Pecan
UPS: Envelope drop at Corner of Nugent and Pecan
PACK & SHIP SERVICES: There is only one "pack and ship" service or "drop off and ship" service in Blanco County.
Going' Postal: 830-833-5400; 310 Pecan Street, On the Square, Blanco, TX 78606. Pack, ship, UPS, FedEx, and more services.
You can also call UPS at 800-833-9943 to schedule pick up at your location, for a small fee.
MEETING ROOMS IN BLANCO:
Most real estate offices have conference rooms and you might be able to make arrangements for use (see Blanco Real Estate Services).
MEETING ROOMS IN JOHNSON CITY: The First United Methodist Church (830-868-7417) has an excellent activities hall and conference room, and in some cases can be rented for business meetings. And similarly with the meeting room at the Library, 830-868-4469.
The National Park Service in JC has an excellent meeting room for rent. See NPS Brochure.
Most real estate offices have conference rooms and you might be able to make arrangements for use (see Johnson City Real Estate Services).
PUBLIC BROADBAND WI-FI INTERNET ACCESS: See locations listed at Wi-Fi.
Blanco Public Library: 830-833-4280; 1118 Main Street, Blanco, TX 78606-4838. Wi-fi and desktop computers with internet access available with library card. Wi-fi available in immediate area outside the library, 24x7. www.blancolib.org
Johnson City Public Library: 830-868-4469; 501 Nugent Avenue, Johnson City, TX 78636. Library Hours: Mon-Fri: 9 a.m.-7 p.m. Saturday: 9 a.m.-2 p.m. Sunday: Closed. www.jclibrarysite.org. Wi-fi available, but broadband connected computers are available at no charge.
Going' Postal: 830-833-5400; 310 Pecan Street, On the Square, Blanco, TX 78606. Pack, ship, UPS, FedEx, and more services.
Johnson City Sign & Print Shop: 830-868-5277; 801 US 281 S, Johnson City, TX 78636. www.johnsoncitysignshop.com
Blanco: Office Cube, 830-833-4741, 307 4th Street, Blanco. Lease office space, furniture, equipment and technology. Fax and copy service. Office supplies. Mon-Fri, 9a-3p.
Johnson City: none available
COMMERCIAL LEASE SPACE: See www.hillcountryportal.com/Rentals-Leases.htm for a listing of available space, or see www.HillCountryPortal.com and click on the city of choice and then Realtors.
CHAMBER OF COMMERCE: You can obtain limited assistance or guidance from the chambers.
Johnson City Chamber of Commerce: 830-868-7684. www.JohnsonCityTexasChamber.com. Mission is to promote the economic foundation of Johnson City Texas. This is a private, non-profit organization run mostly by volunteers for the benefit of its members. The chamber promotes tourism and economic development within Johnson City. Meets monthly.
City Of Johnson City, Economic Development Committee: 830-868-7111 (City Hall). No office location. See city web site: www.cityofjohnsoncity.info
Blanco Chamber of Commerce: 830-833-5101: 312 Pecan Street, Blanco, TX 78606-5348. Email: email@example.com; www.blancochamer.com. This is a private, non-profit organization run mostly by volunteers for the benefit of its members. The chamber promotes tourism and economic development within Blanco.
LOCAL UTILITIES: See Utility Services
POST OFFICES: Web: www.usps.com
Blanco, 402 4th St, Blanco, 830-833-4918
Johnson City, 201 S Ave G, 78636, 830-868-7211
Round Mountain, 10603 US 281 N, 830-825-3421
Stonewall, 14490 E US 290, 830-644-2663
SERVICES NOT AVAILABLE IN BLANCO COUNTY: A temporary placement service for office and other workers is not available in this county. Check the local newspapers, and with local businesses and the chambers.
LOCAL MAPS and OTHER LOCAL INFORMATION:
Blanco: www.hillcountryportal.com/Blanco/Local Information-Blanco.htm
Johnson City: www.hillcountryportal.com/Johnson%20City/Local%20Information-Johnson%20City.htm
YOUR BASELINE RESOURCE CONSIDERATIONS:
PROFESSIONAL BUSINESS SERVICES: Consider using professional help for legal issues, tax and accounting, web, technology, real estate needs, photography, and business counseling. See www.HillCountryPortal.com and specifically the legal, real estate and professional services sections for Blanco and Johnson City for listings of firms that can help you.
BANKING RELATIONSHIPS: You will need one or more bank accounts to handle your cash deposits, checks and other transactions, including credit card processor deposits and "savings" or "working capital". See www.HillCountryPortal.com and click on the city of choice and then Banks.
INSURANCE SERVICES: Typical coverage areas to consider include general liability, errors & omissions, automobile collision & comprehensive, partner buy-out, property/casualty and many more. See www.HillCountryPortal.com and click on the city of choice and then Insurance.
ACCOUNTING & TAX SERVICES: Evaluate whether you have the time and talent to do your own accounting and tax work, or hire a staff person, or an outside professional. Often a combination of internal and outside services works well as a balance on time and expense. See www.HillCountryPortal.com and click on the city of choice and then Professional Services.
TELEPHONE LINES, EQUIPMENT, TOLL FREE NUMBERS AND LD SERVICES: Like the computer area, starting off with the right equipment and services can make life easier and less expensive than if you pay for multiple steps to get to a good solution. Identify your telecom needs carefully and seek professional assistance if your are not confident in your thought process. See www.HillCountryPortal.com and click on the city of choice and then Internet & Computers for local assistance.
COMPUTER TECHNOLOGY: Starting off with the right hardware and software can make life easier and less expensive than if you pay for multiple steps to get to a good solution. Identify your computer needs carefully and seek professional assistance if your are not confident in your thought process. See www.HillCountryPortal.com and click on the city of choice and then Internet & Computers for local assistance. There are no retail outlets in Blanco County for computer hardware and software, so you will need to look toward the larger cities or on-line.
BLANCO AREA: Blanco Computer Repair: 830-833-4641; Blanco, TX 78606. Call for on-site installation & repair services or drop-off arrangements (at Video Shack in Blanco). Fred Looney, Owner/Technician. www.blanco-computer.com
JOHNSON CITY AREA: Cofran: 281-300-7177; Johnson City, TX 78636. Full scope of computer & IT support services. George Cofran. www.Cofran.com
INTERNET & EMAIL SERVICES: Same as above. Consider obtaining your email from the same source as your web site so you can get your email address to be the same as your web site. This is a good marketing move.
WEB SITES: Most businesses now have web sites. There is a growing expectation that even tiny businesses and new businesses will have a site. The purpose of a site can be some combination of simply having a web presence, to advertise and sell products/services, to confirm your existence and to provide additional information that is not practical to provide by other means. The author of this Guide specializes in web sites, and you can get a more information at, well you guessed it, at his web site at www.Cofran.com. The cost of web sites has come down dramatically. Typically, there is an initial design fee as well as a monthly web hosting and content management fee. These fees are dependent on the complexity of your needs and the amount of work it takes to maintain the site to your satisfaction. An initial no-obligation strategy session can be scheduled with Cofran to explore your needs and determine the best approach for a web site, and corresponding fees.
BUSINESS COUNSELING: Another area the author of this guide specializes in is helping small businesses get started and helping any business become more profitable. More on this at www.Cofran.com. Again, an initial no-obligation strategy session can be scheduled with Cofran to explore your needs and determine how best we can help.
CREDIT CARD PROCESSING: If you are going to accept credit/debit cards for customer payment, you will need a credit card processing company and a terminal or hardware/software to process cards at the sales counter or over the phone or internet. There are a lot of choices of processors, and many confusing terms, conditions and charges to you, along with contractual requirements. The author of this Guide provides counseling on the most cost-effective processors to consider, and can make all arrangements for you. You will need to decide whether to buy/lease a small terminal/printer, or use your computer plus a magnetic card swipe reader. The advantages of the latter include elimination of the phone line requirement (use the internet instead), faster processing, lower rates, and computer reports to reconcile the payments you should be receiving from the processor. Further, and very importantly for efficiency, using you computer allows you to possibly automatically integrate the credit card transaction recording with your accounting and point-of-sale software so that you don't have to manually re-enter the transactions into your system.
LOANS & GRANTS TO FUND YOUR BUSINESS: There are many sources of financing, both commercial sources and programs sponsored by a wide variety of government agencies, private foundations and commercial lending institutions. Search the internet for "business loans" or "business financing". Local banks are great sources since they know the local market. See www.HillCountryPortal.com and click on the city of choice and then Banks.
The SBA is an excellent source for financing. Go to www.sba.gov/financialassistance. SBA provides a number of financial assistance programs for small businesses including 7(a), 504 and disaster assistance loans.
Your personal finances must be in good order as well, to allow you to survive long enough for your business to get going sufficiently to support you. Get your debt under control, curb your spending, and build an adequate savings balance.
YOUR BUSINESS PLAN: This should be the first topic listed, but we know it is a hard subject to focus on and complete. So, just consider the rest of the material as a lead-in to developing your business plan.
To obtain financing, you will most likely be required to submit a written business plan. This must be well thought out and cover all the traditional subjects of a business plan, including product/service description, business strategy, formal organization of the entity, ownership, competitive analysis, market research/feasibility analysis, financing/capital plan, pro-forma projections (spreadsheets) for revenue and expenses, pricing strategy, marketing/advertising, location, facilities, major assets, operations, employees/contractors, technology, business threats, administration, accounting, contact information, references, personal financial statements, collateral, etc.
Even if you don't need financing, you should prepare a business plan to help you think through the whole process of starting a successful business. A good business plan is also essential to expanding a business and making it more profitable. There are some excellent resources listed below, and there are local specialists who can help you prepare a plan. You will find a lot on the web by searching for "business plan".
BUYING AN EXISTING BUSINESS: Remember and practice diligence! Check it out "the opportunity" thoroughly. Don't "assume". Demand financial statements for the past several years. Obtain explanations for unusual items. Even if the statements are audited, you must assess the basis for all accounting and financial decisions to see if they are realistic. You must look for what is not said, the hidden liabilities, hidden problems, and the exaggerations. Buyer beware! Caveat Emptor!
Consider a buy-out scheme where the the seller has a vested interest to make sure things go well. Consider having the seller be responsible for some aspects of the business. Everything must be documented, and there must be recourse with assets to back up the promises.
Inspect and audit everything of relevance and determine the condition of equipment. Have the seller document all inventory and equipment and other assets and liabilities. Don't trust the seller or their spokespersons. Incorporate all terms and conditions into a binding written contract. Have a provision for final audit of inventory and equipment on the day of closing. Remember that just because a seller has financial statements that are audited by a CPA does not mean that the deal is good for you or that you should feel that everything is on the up and up. Remember, buyer beware.
Specify (itemized list or spreadsheet) what comes with the business and what doesn't ("Oh, that's my personal computer, and that picture is my personal artwork"). Be sure to cover ownership of: the business name; logos; tag lines; phone numbers; web sites; user ID and password for all on-line accounts and services; signs; photos; unpaid bills; invoices not yet received for the period before the close; money owed to the business; product or equipment located elsewhere; money in bank accounts; equipment belonging to others; product belonging to customers; status of the space lease on transfer of the business (will the lease still be available, will the rate go up; do you have a documented, contingent agreement with the landlord?); continuation of pre-paid services (otherwise the seller might just close the account and get a personal refund); etc.
As a backdrop during this process (and for the franchise topic below), you should also be evaluating the feasibility of starting your own business and not paying someone for their business. You should consider the trade-offs for do-it-yourself versus buying an already made business. It usually takes years to pay off the investment required to induce the old owner to turn over their business to you. Can you give it that much time just to "get back" the investment money? How fast can you ramp up a new business?
Legal and financial consulting help may be money well spent here.
BUYING A FRANCHISE: The advantage of buying a franchise is to acquire a successful business model, which often includes training, and administrative and operational support from the HQ. Still, you must assess the realities of the business in the setting you are considering. The franchise business may be great in one location and terrible in another. You need to independently assess the quality of support and the extent to which the HQ lives up to their promises to you. Visit the HQ, interview their support personnel, and study their materials and support system.
One good way to accomplish this assessment is to make reference calls to a number of their franchises, and in particular, to ones the HQ does not have on their reference list. At the same time, try to ascertain whether they are making the kind of money they thought they would. Visit these locations and "pick their brain", and bribe them into revealing the "inside story".
Some franchise systems have an email list server on Yahoo Groups or elsewhere for current and prospective members, and if there is one for the franchise you are considering, this group can be very telling. Some lists are approved and supported by the HQ and many are not. Sometimes these lists are monitored by HQ and sometimes not. Read the history available on-line and jump in with your questions. Try not to repeat what is available from the history (in other words, do your homework).
Typical franchise deals require your agreement to a very strongly worded contract which spells out what you will pay for the opportunity, and what your rights are and what limitations will be imposed during the franchise period. Read this word for word and get clarification in writing as necessary. An up-front franchise fee usually is required, so you will need to plan how you will acquire that money to invest. Typically, there will be on-going fees based on how much business you do, typically a percentage of your gross sales and often a minimum per month. Often there are complicated formulas. Be sure you understand these completely before jumping in feet first.
Legal help may be money well spent here. The references below contain good materials on this subject.
WILL YOU BE SUCCESSFUL AND MAKE MONEY? After all the research and planning and arranging, regardless of whether this is a new start up or buying an exiting business or a franchise, you would be wise to step back and candidly assess the likelihood that you will make sufficient profits relative to the time an money you will be investing. Is the "opportunity" worth it? Would you be better off keeping the money in a good money market fund? Would another business situation perhaps be better suited? Just because you put a huge amount of time and expense into the project doesn't mean you can't back out. Better to cut your losses now and head toward a more promising opportunity elsewhere, even if that is "just" working for someone else for a steady paycheck and investing your money in a money market or mutual fund.
Part of this reality check includes whether you will be happy for years doing this kind of business compared to what you are doing now or through other opportunities, compared to working for someone else. Will you be bored or will the pressure eat at you? How supportive will your family be? Most small businesses require far more than a 40 hour week from the owner. Can you invest a lot more time and still balance family and other time demands? Will the advantages of being your own boss outweigh all the other negatives?
As critical, candid, self-assessment should be mandatory. You may be an expert in a technical area, but do you have the management skills and knowledge required to plan and operate this business? Can you shore up your weak areas quickly enough? Should you get more training and knowledge before you jump in? Do you know enough about all the functional areas of a business or do you plan on hiring some of that talent (look at each section of your business plan and consider it a talent specialty, such as accounting, marketing, etc.)?
Another useful part of the reality check is to simply ask yourself why someone else hasn't done what you are thinking about? Are you so clever and insightful such that nobody else could make a go at this business but you can? Do you have some critical aspects of your approach in your business plan that will make it succeed where others failed or where they decided to not go forward? Are you kidding yourself?
What about an exit strategy? What if the business does very well? Do you want to sell out and retire early or keep expanding or just keep a steady course? What if the business does poorly? How long can you sustain it before you throw in the towel and concede the loss of your investment of time an money, including wages you could have earned elsewhere? How can you get out of this business if things are bad?
With the unbridled enthusiasm of a typical entrepreneur working on starting a new business, it is hard to be level headed on these issues. Only you can answer these questions, but you need to ask yourself. You might enlist the aid of a trusted business friend who would invest enough time to analyze your business plan to see if your emotions have overtaken your sense of reality. Better would be to engage a professional, a business counselor with experience in such matters, to be your sounding board and reality checker.
And for you, exactly what is success?
OTHER HELPFUL RESOURCES:
US SMALL BUSINESS ADMINISTRATION (SBA): www.sba.gov. A great resource for information on starting, owning and operating a small business. San Antonio Office: www.sba.gov/tx/sanantonio
SBA's STARTING YOUR BUSINESS: www.sba.gov/category/navigation-structure/starting-managing-business
SBA's SCORE (Service Corps of Retired Executives): www.score.org. More excellent tools for business planning, financing, and assistance.
SHOPIFY eCOMMERCE UNIVERSITY: http://ecommerce.shopify.com. An excellent suite of articles focused on internet-based business, but much of this applies to all businesses as well.
SMALL BUSINESS DEVELOPMENT CENTER: Texas-South-West Texas Border SBDC Network, Mr. Al Salgado, Region Director, UNIVERSITY OF TEXAS - SAN ANTONIO, 501 West Durango, Boulevard, San Antonio, TX 78207-4415, Phone: 210-458-2450, E-mail: firstname.lastname@example.org, Web: www.txsbdc.org and www.business.txstate.edu/sbdc
SMALL BUSINESS DEVELOPMENT CENTER AT TEXAS STATE UNIVERSITY-SAN MARCOS: Todd Dallas Guilbeaux, Office Manager, 1555 University Blvd. Suite 265, Round Rock, TX 78664. 512-716-4800. www.business.txstate.edu/sbdc; and www.iedtexas.org/sasbdc. SBDC seminars, counseling, articles, materials and information, for the taking. Great resource for starting and improving your business.
FINANCIAL LOAN CALCULATORS: www.dinkytown.net/loan.html and for a variety of financially related calculators: www.mortgageloan.com/calculator
BUSINESS CALCULATORS: www.dinkytown.net/business.html
BUSINESS and MARKETING PLANS:www.bplans.com/Sample_Business_Plans/index.cfm
MYBIZHOMEPAGE: www.mybizhomepage.com/index.html: A free, web-based service created to help small and emerging businesses run more smoothly and profitably. Provides at-a-glance financial information presented in a Desktop Dashboard with easy to interpret graphics. Three steps and one minute will transform the way you access information, and accelerate your business.
eVENTURING: www.eventuring.org: An entrepreneur's guide.
TEXAS SMALL BUSINESS ADVISOR: http://window.state.tx.us/tba/index.html
TEXAS BUSINESS ON-LINE: www.business.texasonline.com
IRS STARTING A BUSINESS: www.irs.gov/businesses/small/article/0,,id=99336,00.html, contains lots of articles and resources.
SERVICE CORPS OF RETIRED EXECUTIVES (SCORE): www.sanantonioscore.org and www.scoreaustin.org
SCORE'S LINK LIST: www.score.org/small_biz_power_links.html: Lots of good resources.
WOMEN BUSINESS CENTERS: www.stwbc.com; www.bigaustin.org
2002 US CENSUS DATA (business and residential):www.census.gov
TEXAS SMALL BUSINESS DEVELOPMENT CENTER AND THE TEXAS STATE UNIVERSITY: Offers FREE one-hour sessions with a Business Analyst from Austin once a month to visit with people who are looking to start a small business or expand their small business. Some items for discussion include: Business Plans; Capital Acquisition; Financial Analysis; Government Contracting; Home-Base businesses; Marketing and Advertising; Market Research; SBA Loan Guarantee Assistance; SBA 8(a) and other Certifications. For an appointment, please call the Blanco Chamber of Commerce. Pam Ridlehuber, Office Manager, Blanco Chamber of Commerce, Blanco, TX 78606. 830-833-5101
COFRAN'S GUIDE TO STARTING A BUSINESS IN BLANCO COUNTY TX: www.HillCountryPortal.com/web/businessguide
QUESTIONS, COMMENTS, SUGGESTIONS: We can help you with all aspects of your business start-up and operation, from overall strategy to licenses to accounting and management practices.
Take advantage of years of business experience and coaching services, with 35 years working with small businesses. Big 8 CPA experience. Former SBA Instructor.
Please do not hesitate to contact me.
COFRAN & ASSOCIATES, INC (THE WEB GUY & BUSINESS COACH):
281-300-7177; Johnson City, TX: Design, programming and maintenance of web sites. Domain names. Search engine optimization (SEO). Email integration with web name. On-going web & email management. Internet access options and start-up. PC repair, optimization & training. On-line assistance with PC issues via internet connection (Remote Help Desk). Merchant credit card account processing set-up (manual & web based). Business coaching (Engineering degree, MBA, CPA, 40 years business experience). Owner: George Cofran. www.Cofran.com; GeorgeCofran@Cofran.com
Note: The information contained in this document should not be considered legal advice. This information is for general orientation only.
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Reservations & Information: 281-300-7177
9242 RR 1320 (Sandy Road), Johnson City, TX 78636
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