FROM THE NORTH DAKOTA SMALL BUSINESS DEVELOPMENT CENTER

I'm getting ready to start a business. What do I do first?

Your first step should be to sit down and put your ideas on paper. A business plan doesn't have to be a fancy 100 page report; it can be as short as three pages. The purpose of writing a business plan is to make sure that you think through all aspects of your business and develop a plan that will help you reach your goals.

I want to run my own business. What would be a good one to start?

A good business to start is one that fits your interests, the best is one you love. When you own your own business, you work long hours. Can you imagine working 70 hours a week doing something you hate?

The first step is to take an inventory of your interests. Do you love to fish? Are you passionate about gardening? Are you a closet composer? Do you spend your free time raising tropical fish? Draw from your hobbies, your favorite classes in school, jobs you've had that you've enjoyed doing, volunteer work you liked.

The next step is to brainstorm ideas for different kinds of businesses doing what you're interested in. The possibilities are only limited by your imagination. For example, if your first love is fishing, the possibilities would include: a bait shop, a guide service, a fly-fishing tackle mail order company, a firm manufacturing hand-woven creels, a travel agency specializing in little known fishing hot spots, a distributor of trout to gourmet restaurants, a construction company specializing in remodeling lake resorts.

Next is to narrow it down. Identify those business ideas you think you have the skills, knowledge or experience you need to be successful. For example, if you've always worked in retail sales, you can't expect to know much about how to operate a manufacturing plant. You can make that kind of change if you are willing to work to develop the skills you need.

Then comes the acid test: is there a market for what you're thinking of? That takes research. Who are your potential customers? How many of them are out there? What do they like? What don't they like? Who are they buying from now? What will you offer that's better than your competition?

Once you've come up with a business idea you're excited about, that you feel you can be successful at, and that has a good potential market for your product or service, then you're ready to move ahead.

Where do I get a business license?

A business needs to register with the ND Secretary of State's office to do business in ND.

Some industries require special permits, beekeeping for example. Call the ND Small Business Development Center in your region to find out if your type of business has special requirements.

If you plan to sell a product or service that is taxable, you must apply for a sales tax permit. Call the Sales Tax Division of the ND Tax Commissioner's office at 1-800-638-2901, extension 8-3470.

If you wish to use something other than your own name as your business's name, you must register that name. Request an application for a Fictitious Name Certificate from the Corporate Division of the ND Secretary of State's office at 701-328-4284.

If you plan to hire employees, you will have to register for workers compensation and unemployment tax. Request a consolidated application form from Job Service North Dakota at 1-800-472-2952. You will also need a Federal Employer ID number from the IRS. To receive an application (Form SS4), call 1-800-829-1040.

How do I apply for a government grant to start a business?

Contrary to popular opinion, there are not many government business grant programs. There are a few programs that provide limited funds to entrepreneurs who are a member of a minority, a person with a disability, or developing a new high-technology product. But even these are very limited and highly competitive and receive far more requests than there are funds. There are, however, excellent small business loan programs available from many sources. Ask your local bank about loans available from the U.S. Small Business Administration, the Bank of North Dakota, Department of Economic Development & Finance and your local economic development corporation or jobs development authority.

Where can I get low-interest loans?

For many entrepreneurs, the lowest-interest money is "love money," money borrowed from family and friends. When borrowing from private individuals, drawing up a repayment schedule and a loan agreement will help prevent misunderstandings and hard feelings which can damage your personal relationship.

For commercial capital, the best place to start is with your local bank. Many low-interest business loan programs require the participation of a local lender, most notably the Bank of North Dakota and the SBA. Also check with your local ND Small Business Development Center to learn if you may qualify for other state and federal low-interest loans.

Will credit problems in my past make it difficult to borrow money for my business?

Credit history is one of the key factors in any lender's decision. A credit report that shows a history of late payments, judgments or tax liens will make it very difficult to receive loans. Adverse entries stay on your credit report for anywhere from three to seven years. You may have to wait until those negative entries are old enough to get them removed.

Some banks may be able to work with you if they can get the extra protection against default required by banking regulations. You can expect to sign personal guarantees for any business loan. Also, an SBA guarantee for your loan may make it possible for the bank to loan you money. Keep in mind though that if you have ever declared bankruptcy or defaulted on a student loan or other federal loan, you may be permanently ineligible under some programs.

You may need to build up a good credit history with your bank by borrowing small amounts of money and paying it back early or by taking out a secured line of credit. A secured line of credit is one that is guaranteed by funds you deposit in an account and can't withdraw until the line of credit is paid off.

Do I need to spend money for advertising when I can count on great word-of-mouth advertising?

Research shows people will tell only one other person about a new store or product they have tried. This is a really slow way to build sales. A little research and some planning can help you find a mix of advertising, publicity and promotion that will help you reach your sales goals. Word-of-mouth advertising can give your marketing efforts a boost but won't build customers alone.

Does a woman-owned business qualify for minority programs?

Generally speaking, no. The federal government specifically stated that women are not considered a minority group. But, women may qualify for programs designed for economically or culturally disadvantaged groups. Contact the agencies which manage these programs for a definitive answer.

Can I save a lot of taxes by hiring people as independent contractors instead of employees?

You would not be responsible for paying unemployment taxes, workers compensation, FICA (Social Security), overtime or withholding for independent contractors. However, be warned that the IRS and labor departments know that independent contractor status is often used as a way of dodging taxes and expenses of legitimate employees. You can pay heavy fines and penalties if your independent contractors are determined to be de facto employees even if you have signed agreements with them. Check with your accountant and an attorney experienced in employment law to ensure that you meet IRS and Labor Department guidelines.

Do I need a Federal Employer ID if I'm not going to have employees?

No, you don't. However, it is becoming a common ID for business much the same way a Social Security Number is for individuals. Many banks require one before opening a commercial checking account. If you are a sole proprietorship without employees, you may use your Social Security Number in place of the Federal Employer ID.

Is an invention marketing service a good deal?

Some are good, some are not, some are out-right rip-offs. Ask other inventors who they would recommend. Organizations like the Inventors Congress may also know of good reputable firms.

Once you find a company, make sure you understand what you are getting for your money. What services will you get? What will you be expected to pay extra for? Under what circumstances can you get your money back? Have an attorney read any contract or agreement before you sign it.

Before giving a marketing service any money, check them out. Ask for the names & phone numbers of clients they've worked with and then call those references. Check with the Better Business Bureau and attorney general's office in the state the service operates. Check with the North Dakota Attorney General's office to see if complaints have been filed here.

One thing to beware of is an invention marketing service that requires a large, up-front fee with only a vague promise of their "best efforts" to sell your invention. A company that truly believes you have a marketable invention should be interested in working (at least in part) on commission.

Should I trademark my business name?

There is no easy answer to this question. Trademarking is a legal process and will cost time and money. Generally speaking, what a trademark gives you is some legal protection of a distinctive name, symbol, phrase or logo that identifies your business, product or service. (There have even been trademarks registered on smells and colors.) Unless you're prepared to take someone to court for infringing on your trademark, the investment may not be worth it.

What you should always do is make sure you are not infringing on someone else's trademark. Check with the ND Secretary of State's office to make sure your business name is not already registered. The Patent and Trademark Depository at UND's Chester Fritz Library can do a search to make sure a trademark has not already been filed with the U.S. Patent and Trademark Office. For a free preliminary trademark search, call 701-777-4888.