The Pitfalls of Starting a Sign Business: Part II, Home-based
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The Pitfalls of Starting a Sign Business: Part II, Home-based

The easiest way to get started in the sign business is by creating a home-based sign shop. For one thing, itís the least expensive way to get started. Most people do not decide one day to quit their job and start a sign business, not that it canít be done.

By Daniel A. Keegan

Generally, a home-based sign business starts in one of two ways: 1.) That person was working for a sign shop and has decided to venture out on their own, or 2.) It starts as a hobby, something to play around with in your spare time or a means to make a couple extra bucks on the side. Either way it takes a certain amount of capital...money...the all mighty dollar.

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  • The former employee of a sign shop will have less difficulty getting started due to the fact that they already have some experience in the field. Depending upon past exposure to the various aspects of the business in general, they may have less of a learning curve on the production side, but more of a learning curve on the business side. This person may know what it takes to get the project produced, but is at a loss when it comes to billing, collections, taxes and accounting.

    The hobbyist usually starts off producing items for themselves or friends and probably had no intention to make a profit from it. There are a number of reasons that this person has the urge to do this. Maybe they are making decals for model planes, need to make labels for the kids, or have a friend that race stock cars.

    Who knows? This person usually has a 40-hour a week job, but it is funny how a hobby can turn into full-blown business in a short period of time. Why? Because it is something that is enjoyable, you are really good at it and you might be able to make a living from it.

    The starting costs
    So what kind of investment are we looking at? A majority of the time you are not going to go out and purchase the top-of-the-line items. The idea is to spend as little as possible for the things that you need and there is nothing wrong with picking up something that is used and meets your needs. The basic components to any sign shop are: a separate telephone/fax line, a computer system, sign-making software, a vinyl cutter (plotter) and a billing/accounting program. Lets not forget the space in your home to set this up.

    A separate telephone/fax line is a necessity to conduct business especially if you have a family. If you canít use the phone, you canít get business! The combination telephone/fax machine/answering machine is a handy device when there is only a single business line involved. This type of unit can be purchased from $89.95 to upwards of $200.00+ and can also be used as a black & white copier. The monthly rates on a business line are much higher than a residential line.

    If you are serious about this business, it needs to be a business line so that you can get a business listing through the telephone companyís yellow pages and business white pages. They get you coming & going no matter what and get a little irate if they find that you are using a residential line for business purposes. Chances are that this will be used for the Internet too.

    Computer prices have decreased drastically over the past several years. Keep in mind that you do not have to have the top-of-the-line to get the job done. A system with a 500Mhz+ processor, 128MB of RAM, a 30GB hard drive, modem, keyboard, mouse and 15" monitor will handle a majority of the sign making software available. All of the above for under $800.00 usually does the trick. You may already have a personal computer, but the wise thing to do in a business situation is to separate business from pleasure, especially if others also use that system.

    Think of it as insurance. Games eat up a lot of hard drive space. What if the wife or kids accidentally crash the system? Then your business is shut down until repaired. On the other hand, if the business system crashes, there is a good chance that the software can be temporarily installed on the personal system and business goes on.

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    A new startup vinyl cutter & software may not be as expensive as one might think. A 24" vinyl cutter with software can be found for under $2000.00 and a 12" vinyl cutter with software can be found for around $1200.00. Granted, these won't be top-of-the-line, but they will get the job done. Let's not forget the possibilities of finding a used system either. Other options might be through a lease program, but then you will have those dreaded monthly payments and what happens when you decide this is not for you. You still have to make those payments!

    Administration
    Accounting software is a key component to any business and you could do it by hand, but why go through those headaches. Accountants are not cheap and the more that you can do on your own just means that youíre saving money. One of the more popular software packages is QuickBooks Pro, which costs around $250.00+/-, but covers all the bases needed for small to medium sized businesses.

    I'd advise consulting with an accountant when initially starting your business for suggestions in setting up your software to keep things right from the beginning as you may well want/need a professional come tax time. If you plan on dealing with an accountant get their recommendations, but most like QuickBooks Pro.

    Working room may or may not be a problem. Besides the space requirements for the hardware (computer & vinyl cutter) there will be a need for some type of worktable. This is where you are going to weed & tape the vinyl and probably lay up the sign. Keep in mind that your projects are limited in size due to the available workspace that you have. Remember, this is now your office and/or production area.

    It is a good idea to make sure that this area is not shared or used by other family members. The tax laws for a home based business are constantly changing and if you intend to use that area as a tax write-off, use caution and do your homework or it could come back to haunt you.

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    Inventory can be a buy-it-as-you-need-it type of situation in the beginning because you may not know what to keep in stock at first. Plus, the more inventory you have, the more space that is required. The one drawback to this method is that you may not have the inventory needed to provide quick delivery for the customer.

    The government
    Now the fun starts by attempting to satisfy Uncle Sam. A home-based business is not much different from any other business. The goal, of course, is to make money and protect yourself, your family and your assets. Seems as though the world around us has become lawsuit crazy. Anyway, it all starts by filing for a ďfictitious nameĒ, the name in which you will be doing business as (your company name). Then it is on to filing for your organization type such as Sole Proprietor, Partnership, C-corporation, S-corporation or Limited Liability Corporation (LLC). Confused yet?

    It is recommended that you seek the assistance of a lawyer, so that everything is done right the first time. You can file all of this paperwork yourself and save some money, but is the risk worth it. A lot of the time you can find a lawyer that will do this for a minimal fee of $250.00 to $500.00. There are books, filing kits and software programs that are well worth the investment for the do-it-yourself type person.

    If you intend to sell a product, then you need a sales tax identification number. More paperwork! Let's not forget about state and federal identification numbers that you will need to file for. Some of this can now be done over the telephone and is fairly painless. Most banks will not allow you to open a business account without these identification numbers and associated paperwork. After all this is done, in a few weeks youíll start receiving forms to fill out from both state and federal agencies.

    It sounds somewhat overwhelming, but stay calm and seek assistance where needed. Eventually, you will learn the ropes and it is all part of the learning curve. The more you can do on your own, the more money that stays in your pocket. Remember, there is no gain without taking some risk!

    FACT:

    According to recent studies, almost 70% of the businesses in the United States are made up of entrepreneurs and small to medium sized companies.

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