The Top 4 Reasons To Start A Small Business In 2010

There has been a lot of buzz regarding starting your own small business over the last year and it is really heating up now. Some talk about the millions of unemployed people being forced to start over again and how entrepreneurship may play a role in helping them succeed. Others say that small business is the backbone of our economy and success in small business means job creation and stability for the nation. From MSN Money: “According to the Small Business Administration home-based companies contribute more than $530 billion to the U.S. economy and represent 50% of all businesses registered in the United States.”¹ Small business ventures have even been a main talking point for the President of the United States recently; he has called them the “engine of the economy”.²  

There have always been reasons to start your own business.

Small business ownership gets regular attention in the media because it is engrained into our nation’s history. It is identified with such attributes like hard work, sacrifice, ingenuity, and reward. Entrepreneurialism in America is a tradition. Many of the Founding Fathers were entrepreneurs ³ and small business ventures are often credited with generating the majority of new jobs.  

The appeal of small business ownership to many is the thought of leaving the job you hold with someone else and striking it out on your own. Small business ownership offers the chance to work your own way and reap the full reward for your hard work and contribution 

A compelling reason to get started today.

The idea of job security has certainly changed. Many of us have experienced first hand being laid off ⁴, having our hours/pay/benefits reduced, or know someone who has gone through these things.  

We shouldn’t count on our jobs, as we currently know them, to be there in the future. Rather, if you are realistic about how employment has changed you are looking and preparing your “Plan B” all the time. Hopefully, you won’t need a fall back plan, but then hope was never a very good plan.  

1. Improve your expertise

Improving your expertise in an area can open new doors of opportunity for you. Having a skill that you can leverage into generation or saving of money is beneficial especially during uncertain economic times. Developing your interest into a marketable expertise starts with intense study and then regular practice. Pushing your expertise to the next level usually comes from sharing your expertise with others through teaching. However, if taking your skill to the highest levels is your goal nothing compares to running a small business whose core offering is your expertise.  

Running a part time small business, based on your expertise, while still working for someone else, is like learning to fly small planes and then joining the Air Force as a pilot. Yes, you can fly planes but flying combat ready jets will be much more intense. As an Air Force pilot you have instructors and officers who look after your development as a pilot and take measures to ensure your success. It helps reduce the risk of you flying your jet into the ground while developing your piloting skills. By keeping your full time job and operating a small business only part time you still have income security in the event you fly into trouble.  

2. Safety Net

Jane was a supervisor in an advertising agency and was required to sit in on the meetings her boss conducted with 6 of her 19 staff members. The boss was informing each of these individuals that they were being laid off that day and the company was unsure when they may be called back, if at all. Each employee took the news differently, but each seemed to be at least a little caught off guard. Each in their own way stated this was a surprise and even though a few had seen it coming many were unprepared for what lay ahead.  

Jane felt awful for the people she had worked with for so long, and at the same time felt the reality of the situation sink in. What if next time these meetings were held it was her on the other side of the table, across from the boss? Like many of her now former employees she felt she had no safety net to catch her if she fell off the payroll.

Jane got to work immediately. Her interest in baking unique wedding treats had only been a hobby until now, but she determined that it was time to turn that interest into income. She found an outline that spelled out how to get a sole proprietorship started and got to work on each of the steps. Jane knew she had a lot to learn and success wouldn’t be immediate, but at least she had a back up plan in place.  

Jane looked at her business start up it this way. Every day that she came home from work and invested in getting her small business up and running was one more day she was ahead of the game. If she lost her full time job tomorrow, next week, or next month she could hit the ground running as she had been working on creating an opportunity she could fall back on.   

3. Additional income

The easiest way to get started in small business is doing something you are good at and love doing. That is way many people will find a way to turn a hobby or special interest into additional income through a small business.  

While your hobby has generated relaxation and fun for you it has most likely been an expense rather than an income. Bobby loved to bowl. He was actually very good at it and had won several tournaments. He spent so much time bowling at the local Altoona alley that he was even present when Barack Obama showed up for a quick game of bowling while on the campaign trail.⁵ Given the amount of time Bobby spent at the alley practicing, bowling related costs were a concern at times.   

While things were great at the alley Bobby was thinking about the lay off talk around the water cooler at work. Concerned about his job security at a research laboratory he decided to turn his passion of bowling into an income stream. It was a natural progression for Bobby to go from a bowling tournament champion to a personal bowling coach. Now that he was a coach and operating as a part time sole proprietor he was making more money at the bowling alley than he was spending. While off to a slow start Bobby still felt good that he had an income from a core group of weekend students he could fall back on if he lost his research position at the laboratory.   

4. Tax deductions

What are the chances your boss will walk up to you this year and offer you a 15-25% pay increase? Most of us will probably not hear those words! Tax deductions that the IRS encourages all small business owners to be aware of and use could give you back a substantial amount of the federal taxes taken out of your check each payday. If you are in the 25% tax bracket, for example, it is possible, through legal tax deductions, to receive a lot of that money back. Whether it is more money left in your paycheck each week or a giant tax refund it will feel like a big pay increase. The good news is that you can get that “raise” on your own without the boss’s intervention.  

Operating your own small business will give you the opportunity to deduct the expense of many items you currently use, but are not deductible for non-business owning individuals. It is not that difficult to wrap your personal lifestyle around your small business’s needs. What used to be non deductible personal related expenses are now necessary for your business and thus are tax deductible.  

Angie enjoys traveling to craft shows. She is a crafter herself and makes beautiful wreaths. She goes to the craft shows to buy supplies for her hobby, learn new techniques, talk to fellow crafters, and enjoy other crafter’s creations. Frustrated that she hadn’t received a pay increase in two years, Angie pursued starting her own small business on the side after hearing about the tax benefits. She now sells the crafts she makes in addition to participating in crafts shows. 

Now that she was also selling crafts at the shows, under the name Angie’s Artwork, she was able to deduct many of the expenses she used to have as a hobbyist. Angie didn’t make much money, but wasn’t as concerned about that. She still did the same activities, but now sold her wreaths as well. All of her travel, supplies, and other expenses, like fee to enter the craft show, were deductible. Angie was excited to see her tax refund go from the average of $2,800 to about $4,300 just for doing something she loved.  

You are not required to have special business training, a storefront, or even large profits in order to be a business owner. For a full time employee of someone else one of the biggest advantages of turning your interest into a small business is the amount of money you can receive back on the federal income taxes that are deducted out of your paycheck.  

Resources:

1) http://articles.moneycentral.msn.com/Investing/Extra/EntrepreneursWhoMakeItWorkAtHome.aspx

2)  http://www.whitehouse.gov/the-press-office/weekly-address-president-obama-says-small-business-must-be-forefront-recovery

3) http://reason.com/archives/2009/02/12/founding-father-entrepreneur

4) http://www.bls.gov/news.release/empsit.nr0.htm 

5) http://www.youtube.com/watch?v=-afpPb2NT2I

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Top 4 Reasons

1. It will improve your expertise

2. You'll weave a safety net

3. It could provide more income

4. Reduce your tax liability

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