It is rarely easy to figure out what the start-up costs will be for a new business, mainly because you have a moving target that is easy to underestimate and frequently subject to change. Start-up costs reflect expenses incurred prior to commencing with the business plan, usually before the first month. It is no secret that many new companies incur initial expenses for legal work, logo design, brochures, and other expenses. Using a start-up worksheet to plan initial financing will help gathering the necessary information to set up initial business balances and prepare a preliminary estimate of start-up expenses (Fig. 15.1). Needless to say, estimating the amount of capital needed to start a new business requires a careful analysis of a number of factors. A list would be needed of realistic expenses of one-time costs for opening your doors that would include all needed furniture, fixtures, and equipment. The list would also include but not be limited to the cost, down payment, or cash price of items, or if purchased on an installment plan, the amount of each monthly payment and for each product.

Your accountant should be the first person to consult in matters relating to whether you should hire yourself or others as full- or part-time employees of the company, as you may require registration with the appropriate State Agencies or obtain Workers Compensation Insurance or Unemployment Insurance (or both). Numerous major firms now allow (or prefer) some of their employees to work from home and only come into the office say, once a week or as required. This could be suitable for say, accountants or estimators.

These are necessary overheads when leasing a new office. Advance deposits, especially for new businesses are often required when signing up for Power, Gas, Water, and Sewer. Also, once the decision is made to establish your own business and an office has been leased (if you are not working from home), find out when the next issue of the telephone directory is to be published and the deadline for getting listed, so that you can include a display ad in the yellow pages under the classification that best describes the company’s services.

For a new business, many suppliers may be reluctant to ship their goods without some sort of assurance that they will be paid. It may help to have some good credit references which is why it is important to have a rapport with your banker as he can provide acceptable credit references to your suppliers. Identify key suppliers and determine if the supplier needs convincing that you are honest, hard working and that you are in for the long haul and that your business is solid and has a good chance for success. Some suppliers may request you to pay C.O.D. during the early stages of getting started; take this fact into consideration when preparing your financial planning and start-up estimates. Once you have become established with your suppliers, send your financial data to Dun and Bradstreet to be listed in their files. Most American firms recognize Dun and Bradstreet as a very reliable organization for obtaining correct credit information about a registered company.

Upon signing a rental lease, apply for a phone number (also consider an 800 number) and domain name for your new business Internet website (this is discussed later in the chapter). When you get the phone number, look into a yellow page advertisement (or at least listing), and consider whether to be listed in several headings, or just the most appropriate heading for your services (compare what the competition has).

Almost all larger firms have developed standardized digitized expense report forms for their employees so that they can request reimbursement for their business expenses. Even with a new start-up business, it is vital to monitor expenditure, and a standard form may be the best way to do so as it makes it easier for bookkeeping (Fig. 15.2). Where the expense form is not standardized, it should, nevertheless, be neatly typed and organized, identifying each location, project name and number, and applicable dates with all original receipts and supporting documentation attached in date order. It should then be handed over to accounting to process and record as soon as possible.

For every type of business, it is important to set up a good accounting and record-keeping system and to learn as much as possible about what taxes your new company is responsible for paying. Company documents and tax and corporate filings are generally required to be kept for 3 years, including: a list of all owners and addresses, copies of all formation documents, financial statements, annual reports, company amendments, or changes.

There are numerous other start-up expenses that need to be taken into consideration when estimating the amount of cash that will be needed when setting up a new business; these include both business and personal living expenses. Thus, if you are leaving a salaried position to start your own business, you need to include in your expense projection an estimate of the costs you and your household will incur for the months it will take to build up your business. At this point, it probably makes sense to review certain categories, such as equipment, office supplies, or advertising/promotions, with cost-control in mind. If it appears that your estimated start-up costs are greater than originally anticipated, it may be time to review and reevaluate your list of projected expenses and decide, for example, if it is more practical to purchase or lease used office equipment or furnishings than buying new. With this in mind, the classified ads may be a good point to start your search. Classified ads can lead you to bankruptcy auctions, house sales, and furniture resellers in addition to individual items in the classified section. To ensure that you are on the right path, do not shy from asking your attorney or accountant for referrals to business owners who have relevant experience in evaluating start-up costs.

It is vital for a new business to create a good corporate image and business identity that reflect confidence and efficiency. Usually, this means hiring a professional designer to design a corporate logo, business card, letterhead, and promotional material for the business. The logo should be simple and not easy to forget; it represents the visual image of your company and will be used in a variety of applications. Moreover, an attractive and professionally created logo and letterhead can go a long way to giving clients the image of confidence and trustworthiness while reducing their perception of risk making it easier to command a premium price for your services. A good logo also says who you are, how you are different from your competition, and why a client should do business with you. The need to have a good logo cannot be overemphasized.

With any new business, it is important to getting the word out about your business so that customers start coming through your door or your home page. To do this, you will need to research your target audience and develop a marketing message that will resonate with them (Fig. 15.3). Some small new businesses start their operation with a grand opening announcement, in addition to press releases to the local press and relevant business publications. Circulars can be printed and distributed to potential clients or placed in the newspaper to be distributed to subscribers. The dollar cost of planned advertising and marketing initiative announcing the launch of new business should be recorded and reflected in the budget and should include the cost of all promotional items including flyers, brochures, phone calls, and signs. Competition ads should be studied along with their websites.

Prior to marketing your services, adequate research is required to get all the facts just as was done prior to writing the business plan. This will help you formulate a successful marketing strategy that will target your ideal customer and thus be much more methodical and effective. Research will also facilitate in the development of professionally designed brochures and other marketing materials by determining who your target audience is and what their preferences are. As you are selling a specialized service, it is imperative to know how to market this specialized service. To do this successfully, several key questions need to be answered such as:

To be successful, it is important to dress appropriately in corporate environments. For example, you do not want to show up in tennis shoes and jeans to an executive meeting, or in a skirt and heels to perform a construction job walk. For general meetings, appropriate dress normally implies for men to wear dress slacks, a clean button up shirt with tie and a blazer or waistcoat. A jacket may not be necessary in some situations like if you are inspecting a building site in summer. And obviously, it is not necessary to wear a business suit when you are working outdoors. However, in the final analysis, this will depend on your own individual situation, environment, and the audience you are dressing for. Another important aspect of proper business attire for a man is to be clean shaven as scruffiness is unprofessional. To further enhance your image and complete your ensemble, hair should be clean and well-groomed and cologne or aftershave should be subtle, not overpowering. If you choose to wear facial hair, it should be closely trimmed and well-groomed.

When attending an event where you are likely to meet potential clients e.g., a conference, seminar or even dinner, be sure to carry business cards and perhaps some literature about the company. Also try and portray an air of confidence; this will give you the appearance of an accomplished professional to others. Be cool, calm, and collected, and, most importantly, think before you speak. Be organized and prepared and have the necessary knowledge to answer any questions you may be asked, and show customers that you can execute the job successfully.

It is always wise to consult an attorney and accountant before deciding on a legal structure, because there is no universally “right” structure for all businesses and choosing the right one for you depends on your specific needs. Since there are advantages and disadvantages for each type of business structure, it is important to understand the various options available to you before setting up your company. There are basically four different forms of business ownership when selecting a legal structure: (1) Sole Proprietorship, (2) Partnership (general or limited), (3) Limited Liability Company (LLC), and (4) Corporation or S-Corporation.

An Employer Identification Number (EIN) number is a unique nine-digit number assigned by the IRS to business entities operating in the United States for the purposes of identification. The EIN is required for almost all types of businesses and acts as your business identifier on all types of registrations and documents, and most banks would not let you set up a business checking account or apply for a loan without this number. Apply for a federal EIN as soon as possible (if a corporation, upon receiving your corporate charter back). You can do so by going to the IRS Website and download form SS-4. Once this is filled out, call toll-free (866) 816-2065 for your EIN. Once you get the EIN number, download Form 2553 (S-election) if you want to avoid double taxation on your company earnings, and fill it out. It is strongly advised to mail this form via certified mail, return receipt requested, as the IRS sometimes tends to misplace this important tax election, and the burden of proof is solely on you to prove you sent it within the appropriate time. If the number is used for identification rather than employment tax reporting, it is usually called a tax identification number (TIN). Businesses that are considered proprietorships do not need an EIN and in which case the Owner/Operator SSN is used on tax documents. Should you chose to form an LLC, you will need to decide how you prefer to be taxed (e.g., as a sole proprietorship, partnership, S-corporation, or C-corporation), and use IRS Form 8832 to make your decision.

Now that you have taken the decision to start a new business, the next step to be implemented is to obtain a number of licenses and permits from federal, state, and local government. A contractor must have the appropriate license prior to entering into and performing a construction contract. The purpose is to regulate the industry for the protection of the public, including homeowners, commercial project owners, and even public project owners. Licensing and permit requirements for small businesses may vary from one jurisdiction to another, and so the new business owner must contact state and local government to determine if any specific requirements are in place prior to setting up a new business. Keeping this in mind, below are some of the different federal, state, and local licenses and permits that may be required prior to opening for business. Note that the impact of performing construction work without a proper license varies from one state to another, but in many states an unlicensed contractor cannot enforce a construction contract against a project owner based on statute and case law. However, the expiration of a previously valid license is a common exception to this.

Having adequate insurance cannot be overstated especially for general contractors and professionals. This is discussed in greater detail in Chapter 16 (Litigation and Liability Issues). Premiums are usually high, especially for business liability, but no general contractor or consultant can operate with peace of mind without full coverage. There are many types of insurance on the market for businesses, but these are usually packaged as “General Business Insurance” or a “Business Owner’s Policy.” An experienced insurance agent can be helpful to advise you as to the types of insurance you will need and the type of coverage available (e.g., general liability insurance, health insurance, fire, property insurance, burglary, company vehicles, workers compensation, business interruption, and malpractice insurance). It is advisable to seek estimates from two or three different agents. It is also imperative to have adequate liability insurance, and anyone contemplating to offer contracting services is strongly advised to consult with an attorney. If you have employees and plan to offer them health insurance, talk to your agent about the upfront fee and record the premium payment you will need to make before opening your business. Health insurance costs are among the most important concerns facing small business owners today.

You will not be able to open a business account for your firm without a valid TIN, also known as EIN. Once you have this, you can use that number to open a business checking account. Find a bank that is convenient and where you feel comfortable with the bank manager. He or she can be one of your best references as well as a source for advice and help on financial matters. Even if you are not interested in qualifying for a loan yet, banks can provide a numerous other services fundamental to your business that are generally financial in nature. These can include business checking accounts, business credit cards, and even provide a credit reference. Additionally, banks have great contacts in the community and can be an excellent source of business referrals which is why having good relations with your bank manager is of paramount importance. It may also be useful to develop a line of credit, so it will be there should you need it further down the road. Make sure you maintain separate business and personal finances from the beginning, to avoid comingling and thereby complicating bookkeeping and tax returns. Likewise, you cannot establish a bank account without a Federal ID number or social security number along with your certificate of assumed (fictitious) business name. If you are incorporated, you may be required to provide a copy of the minutes and a corporate resolution authorizing the account. It is also better to visit the bank you wish to open an account with and discuss with the bank manager what their specific requirements are to open a business checking account and to see if you feel comfortable with the bank manager. Bank requirements vary from bank to bank; some banks are fairly simple whereas others are extremely complex. The more important issue here is establishing a rapport and empathy early on with the bank manager and making sure that he understands your potential needs and is willing to give you bank references, etc.

Maximize what you can deduct according to Section 179 of the IRS Tax Code, and discover what you can write off by knowing what constitutes legitimate business expenses. For this a proficient account will be needed to prepare your accounts. Tax consultant David Wetzel says, “Proper planning will result in you getting all the deductions you deserve. Poor planning raise a red flag with the IRS. Sloppy looking returns and indications of poor record keeping will earn you a trip to see your friendly IRS agent.” Below are some possible tax deductions, but these are likely to change from time to time:

With most businesses and organizations, the public now expects them to have a Website—one that can, at the very least, supply basic information about the services offered and a means of getting in contact. A website and the services it can provide are essential for a 21st century business. In fact, today, a website has become nearly as essential as a telephone, fax machine, or printed brochure. Not having one of these tools can put your company at a serious disadvantage. Furthermore, having a website has many advantages such as marketing your company’s services to the world. It is important to consider what information you desire potential customers to gather from visiting your website. For example, a website can inform consumers and end-users on the benefits of green contracting and how it adds to their bottom line. Well-designed websites usually serve a number of functions that include:

Perhaps the first clarification required to proceed in building a website is to decide whether to hire a professional to build the website or whether because you are on a tight budget and feel sufficiently competent to do it yourself. Whatever is decided, remember that the website is an important means of communication with your target audience, and thus one of the first steps in planning the website must be to decide on its content. The content should be about what customers need or want, not about the company itself. Ben Seigel, Principal of the Web design firm Versa Studio, says, “Planning is essential for most businesses and organizations. In practice, many people fail to plan their websites. Sometimes the ever-busy, dynamic nature of running a business is to blame; there are so many operational demands that proper time is not allotted to projects. But this often happens because people fail to recognize that planning for the Web is just as important as planning for anything else in a business.” It is important therefore to try and contemplate what potential site visitors will want to know or see featured on the site when logging on and making sure that the image that the site is to convey to visitors actually contributes toward that end. Furthermore, the website should be organized so that prospects can easily identify the firm’s areas of expertise. In this phase, you really need to research your market and determine the main competition and what their main strengths and weaknesses are. Periodic searches of competitors’ websites can prove to be helpful and should include other general contractors and green building websites to examine the types of services being offered to visitors and to see how they are marketing themselves online. It may also be prudent for a new company starting from scratch, to conduct a quick survey to further assist in learning precisely what services may be required.

The fact that the Internet is constantly evolving requires the administrator to constantly monitor it and to regularly refresh, update, and add new content. This will help increase visibility in the search engines and give customers a reason to continuously come back to your site.

Pinpointing a target audience depends very much on the research you have previously conducted and the answers that you have come up with. The primary purpose here is to know your potential clients so well that you answer any questions they might have before they ask, then make it easy for them to “buy” the concepts you are selling. Clients include existing customers and clients, potential clients, people interested in your area of specialty (who may never have heard of you), organizations, individuals, different groups, and so on. If you are a green builder/contractor, your targeted groups might look a little like this:

Security is considered to be one of the most important issues that concern any website. The webmaster needs to be vigilant about the security of your Website and content, your network and your customers’ private information. The webmaster needs to take this into account, creating firewalls, installing the latest internet security software programs, etc. There are many security software programs on the market such as: Security Shield, CA Internet Security, Norton 360, Norton Internet Security, and McAfee. It is also important that whoever is to be responsible for keeping the site up to date must be able to write and update the pages as needed while keeping abreast of new technologies to maintain the site and keep it fresh and interesting.