Taking money from your 401K plan to help finance startup costs for a small
business is a BAD idea. It just won’t be the cheapest money available. A
home equity or small business loan will have a much lower interest rate
than what your 401K plan is earning. The overall failure rate of
businesses is around one in three. Starting a new business is always a
risk…but keep your 401K for the future just in case.
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Developing a business plan
Your business plan is a “living document”. You’ll modify it as you gain
experience and knowledge. It should not only show how your business will
make a profit; but it should also contain timelines and milestones to help
you gauge your progress. You might even want to show your business plan to
your employees. It will give them a broader understanding of what your
business is all about and where it’s going.
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Targeting your market
How do you the target market for your business? Use market surveys and
competitive analysis to find the best niche for you. Look for the
configuration of products, services, quality and price that will ensure
you the least direct competition. This may take some time, but it will be
worth the effort when you find the niche that’s right for you.
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Proper Pricing
How do you know if you’ve priced your products or services properly? Ask
yourself some questions. How do your prices compare to the competition’s.
How do customers perceive your prices. Do you have a product with a
recognizable name that allows the luxury of overpricing. Of course you
also have to consider your costs of production.
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Protecting your business
Learn about legal structures, business contracts,
intellectual property and more.
