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Advice on starting a small business
nevilleThe Worst Gay(Seriously. The Worst!)Registered Userregular
So I've been baking for about 6 years now. It started out as a "Hey I'm poor, I will try to make something I can't afford and see if it tastes good." Maybe I inherited my mom's cooking genes; she is pretty fantastic and has a small business for about 15 years selling pasta.
So I'm seriously considering making desserts (mostly cheesecakes) and selling them. I've now had 4 people offer to pay me to make them one. Not a "I'll pay you ____" thing, but "Tell me how much you want me to pay you; I want one of those."
Just not sure how I should go about doing it. I could do it word of mouth, but since I mostly associate with students. Any advice?
Before beginning planning, figure out exactly how much it costs you to make a cheesecake, including ingredients and a reasonable hourly cost for your services. Then add on a reasonable margin and see if you'd actually turn a profit by selling the cakes. $30 for a cake sounds great until you realize you're using $25 in cheeses alone and it takes 4 hours of labor to create.
Dark Moon on
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nevilleThe Worst Gay(Seriously. The Worst!)Registered Userregular
edited February 2009
I figured out costs and it's not $25 in materials. So if I charged $30/ea, I think I'd make a decent profit.
It's more a question of:
1 - Where do I sell to? Or OFFER to sell to?
2 - do I need to be incorporated, maybe as an LLC? I probably don't NEED to, but maybe it's a smart option.
I figured out costs and it's not $25 in materials. So if I charged $30/ea, I think I'd make a decent profit.
It's more a question of:
1 - Where do I sell to? Or OFFER to sell to?
2 - do I need to be incorporated, maybe as an LLC? I probably don't NEED to, but maybe it's a smart option.
Yeah, I agree with Tube. An LLC isn't really necessary.
My suggestion is to just come up with a name for your business and file it as a fictitious business name. You do this either with the state or the county depending on where you are. (Google "fictitious business name fill in your nearest metropolitan area here"). Then get some business cards printed up.
Make sure you keep an accurate accounting of income and expenses. You're going to want to declare this on your income tax at the end of the year, and for that you want to know exactly how much money you made and how much you received.
As for your first question, are there any coffee shops on campus? What about independent coffee shops around town? How about small locally-owned restaurants? If you have the time and determination to view this as a job: i.e., to bake a few desserts a day every single day, then you could probably pretty easily find a coffee shop or a little mom & pop restaurant who would be happy to put one of your cheesecakes in the cooler for customers. That's a good deal for them; if you sell them a cheesecake for $30 and they divide it into eight pieces and charge $5 a piece, they've just made $10 profit. And they don't have to worry about hiring a pastry chef. That's why you want a business name and business cards - you want to be able to drop off your cards at such places. And maybe some little samples, too.
Keep in mind that you have to treat it like a job if you go that route. You need to deliver consistent product every day or two.
Feral on
every person who doesn't like an acquired taste always seems to think everyone who likes it is faking it. it should be an official fallacy.
the "no true scotch man" fallacy.
0
nevilleThe Worst Gay(Seriously. The Worst!)Registered Userregular
edited February 2009
My school is two buildings and we don't own all of either one. We don't have a "campus" per se.
As far as coffee shops, no. But there are a number of smaller bakeries and coffee shops in Seattle. Granted, that's a little drive. But I could also go the restaurant route.
A coworker when I started at a games company was leaving to pursue music, but his ultimate goal was to open a small cafe/restaurant in Seattle. He said I have a standing offer to be their pastry chef if I ever decided to quit software. I've gotten enough praise for what I've made to think it's not just people being polite for its own sake.
The only thing is I'm a full time student, so I don't really want to do this EVERY DAY. I'd prefer to do it on weekends maybe and supply whomever wants then for the week. And yes, I know I'd need to keep track of everything.
neville on
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nevilleThe Worst Gay(Seriously. The Worst!)Registered Userregular
edited February 2009
Stale suggested I call the business "The Cake Lady"
which is pretty fucking funny, considering
Yeah, I agree with Tube. An LLC isn't really necessary.
WOAH WOAH WOAH. No. Stop. Forming an LLC isn't the first thing you need to do when starting a business, but it is absolutely necessary before you actually sell even a crumb. The liability involved in selling any manufactured goods (including delicious food!) is considerable, and doing business on even a limited scale without that basic protection is extremely dangerous.
Beyond granting you the ability to do business (i.e. accept checks) under a fictitious name, a D.B.A. provides absolutely no legal protection whatsoever. If your fictitious business gets sued and you lose? Yeah, they take your house and car. All it takes is somebody getting sick because of one of your desserts (say that jar of Peter Pan peanut butter you used happened to be tainted), and that's it, your life is ruined.
For the love of God, don't take that chance. An LLC typically doesn't cost much more than a D.B.A., so if you're serious about this, spend the extra money and do things right.
Cant give you specific start up advice as I run my business in the UK but
- You will make a loss or at the very best break even in your first year. Its a very lucky business that makes any real money year one.
- Dont under value yourself but look at your competitors. If you say you make very good cakes think about an initial promotion to get your potential customer hooked on your goods and off your rivals.
- Advertising, I wasted plenty of advertising in the wrong place. Keep it focused in a high potential customer area, in the first year you’re after building a regular customer base. What a lot of people forget is that advertising isnt just about getting new customers its also about keeping your existing customer aware that you’re about and still in the game, so remember to follow up advertise places you've already hit if they were successful.
- Keep at it, you'll never work as hard as when you work for yourself but it is totally worth it and rewarding even if you dont instantly make your millions.
- Give yourself a break, your human too and need time off. I started working 12 hours a day 6 days a week when it started picking up and I was still on my own, it almost killed me.
Thats all I got for now, im by no mean an expert but ive learnt by experience over the last 16 months, oh and keep records of EVERYTHING.
You realize, at least in the United States, you cannot just sell something you make in your own kitchen, unless it is inspected by the appropriate people.
I suggest looking into local churches and the like about renting out kitchen space, making large batches of these cakes, and going from there.
Forbe! on
0
nevilleThe Worst Gay(Seriously. The Worst!)Registered Userregular
edited February 2009
I've started looking into some local places.
My house also has two kitchens, which is allowable.
But again, this is for a part time deal, not a full scale restaurant level operation I'm wanting to open.
So some of the suggestions here aren't entirely applicable.. at least yet.
It sounds like this might not be a great plan for you right now neville. What it sounds like you're looking for is a way to make a little extra cash on the side and you're unlikely to turn a profit with this without serious time investment.
Yeah, I agree with Tube. An LLC isn't really necessary.
WOAH WOAH WOAH. No. Stop. Forming an LLC isn't the first thing you need to do when starting a business, but it is absolutely necessary before you actually sell even a crumb. The liability involved in selling any manufactured goods (including delicious food!) is considerable, and doing business on even a limited scale without that basic protection is extremely dangerous.
Beyond granting you the ability to do business (i.e. accept checks) under a fictitious name, a D.B.A. provides absolutely no legal protection whatsoever. If your fictitious business gets sued and you lose? Yeah, they take your house and car. All it takes is somebody getting sick because of one of your desserts (say that jar of Peter Pan peanut butter you used happened to be tainted), and that's it, your life is ruined.
For the love of God, don't take that chance. An LLC typically doesn't cost much more than a D.B.A., so if you're serious about this, spend the extra money and do things right.
For the most part, I agree with Cardboard Tube regarding neville's plan. However, since other people might be reading this, I want to respond.
WP, your post depends very strongly on state law and the nature of any hypothetical lawsuits you're talking about. However, in most states, in the event of a lawsuit they cannot take your house or car unless you have significant equity on it (and in that case you can refinance and just pay the equity). Secondly, an LLC might not protect you from damages from a lawsuit arising from personal misconduct or negligence when you're the sole member and employee. There are a number of legal tests a court can take to determine whether they can "pierce the corporate veil" and hold you personally responsible for your fuck-ups despite operating as an LLC - again, this depends highly on the nature of the lawsuit and on state law. Third, the cost varies by state law; in some states doing business as an LLC will change your tax rate.
I'm not saying that an LLC is a bad thing. I'm just saying that it's a more complicated undertaking and not as cut-and-dried as your post implies.
Feral on
every person who doesn't like an acquired taste always seems to think everyone who likes it is faking it. it should be an official fallacy.
I'm not saying that an LLC is a bad thing. I'm just saying that it's a more complicated undertaking and not as cut-and-dried as your post implies.
Granted, but I'm just saying it's extremely short-sighted to dismiss the necessity of an LLC entirely -- especially given that the OP would be entering into food services. Beyond that, though, I don't think it's worth arguing the point; it doesn't sound like the OP really has the time or capital to really pursue this.
Small businesses are a massive drain on time and money. My business is in a sector that's considered to have a very low cost of entry, and I still spent thousands upon thousands of dollars starting up. Sorry to rain on your parade, neville, but you'd almost certainly spend more than you made on this even if you didn't shell out the money to get your business 100% kosher legally. Even the bare minimum requirements of a food safety training certification, D.B.A. filing (and corresponding advertisement), business permits, and a city-issued business license (if required) will cost well into the four digit range. :?
Also, do not fuck around with taxes. That first year you will probably be taking a significant loss, so they won't be that bad (if not incredibly good for you in the form of a fat return), but the second year when things start to even out you can easily get blindsided by self-employment tax. Some people love to do their own taxes in this realm, I personally don't think it's worth the time and the hassle. Find a good accountant and let them manage your taxes and figure out estimated tax payments for you. It should run you somewhere between 250-400 dollars for this service and it is extremely worth it both for your own peace of mind and the time it would take you to do it.
For the record, Wasted Pixel may be a little alarmist, but he is absolutely correct.
An LLC is vital, especially when you are selling any product. It costs about 25-50 dollars in filing fees, and that simple act protects you a great deal. Piercing the coporate veil requires proof of intentional negligence, knowledge, and a lot of other things are too voluminous in content to discuss and still be helpful.
Advising someone to not start an LLC because someone can pierce the corporate veil is like telling someone not to get insurance on their car because if they drive drunk their provider won't cover an accident should it occur.
I think he should put together a plan, make a few cheesecakes, and test his profit margin - you'd be surprised how many extra costs you are unaware of, no matter how meticulous it is. If that works (sell those cakes directly to friends for cash, etc), then form an LLC and sell those cakes. Also, once you have a hundred bucks or fifty bucks or whatever, form a seperate bank account. That way if you screw up your money and how much you are making for whatever reason, youll be able to access those bank statements in perpetuity.
I don't mean to jump on anyone, but if you think that managing risk through forming llcs, etc., is not always necessary, it would be good to take a little deeper look into that area. I used to feel the same way (I had a DBA that i produced little plays and music and crap with), until I took a good hard look at the issue out of concern for liability and taxes. Anyone doing business should HAVE a business, otherwise you are setting yourself for disaster in this litigeous world from the get-go.
Any time someone says "you don't need an LLC/corporation" I can only help but cringe. So please don't feel like im jumping on you guys. Good luck, cheesecake guy.
It costs about 25-50 dollars in filing fees, and that simple act protects you a great deal.
Curious about this as I know it varies from state to state, but I'm looking to form a LLC in MA which apparently costs a staggering $500. Am I looking in the wrong place or what? $500 is a lot more than I'd be willing to shell out, especially for a very small business.
It costs about 25-50 dollars in filing fees, and that simple act protects you a great deal.
Curious about this as I know it varies from state to state, but I'm looking to form a LLC in MA which apparently costs a staggering $500. Am I looking in the wrong place or what? $500 is a lot more than I'd be willing to shell out, especially for a very small business.
Most companies don't incorporate in their home state. Delaware, Wyoming, and Nevada are all popular states to incorporate in because of low initial cost of filing, low/no taxes, and laid-back business laws. Wyoming, for instance, has no state corporate income tax, no minimum capital requirements, and meetings can be held anywhere. There's rarely a persuasive reason to file in your home state.
Neville, have you done a cost-benefit analysis yet? That really ought to be the first thing you do. Maybe it's the engineer in me, but I'd say you need some research first. Off the top of my head:
1. What is your target market? Are you making cheesecakes for small businesses or for individuals? This will drastically affect how much you can charge. I know where I live, I can get a whole cheesecake for $10, $20 for a nice one. That's probably very different from prices where you live, but keep in mind that in times like these people will be looking to save money, and you're providing something of a luxury.
2. How much does it cost for you to make a cheesecake? Keep in mind that you add up everything: materials, wear on your equipment/tools, time spent per cake. Are you going to deliver them? That's more time, gasoline, and wear on your car. If they have to pick them up, that's going to mean you can't charge as much.
3. How many cheesecakes can you make compared to how many are wanted? You'll probably need to produce a relatively high volume of cheesecakes to turn a profit (delivering 5 cheesecakes in a single delivery is much more cost effective than 1 cheesecake per trip, for example.) Might restaurants get cheesecakes/desserts in bulk from a supplier for cheap and freeze them? You could probably offer a similar deal, but you'd have to be sure to keep up with their demand or they'll probably just save their time by buying from the big manufacturer, regardless of quality.
Remember the first rule of supply and demand: firms are in business to maximize profit. If you can't help them do that, they're going to abandon you. If you're selling to individuals, you have more leeway, but that's a much less reliable source of sales.
What would be required to register out of state? Just the paperwork and the filing fee?
Edit: After looking at meeker's link I guess that's all I need. Is that site legit?
It is Intuit, the makers of Quicken. They send out a bunch of junk mail to the business, so they must be selling the mailing lists, they also try to get you to buy services and extraneous crap, but it is all no pressure and completely optional.
meeker on
0
TL DRNot at all confident in his reflexive opinions of thingsRegistered Userregular
What about selling them at a Farmer's Market? I know Seattle has several of them around town.
Something where I have to go and wait around isn't something I want to do.
I am in school, again, so that's too much.
And it wouldn't save me from any of the other points brought up.
Then go to these Farmer's Markets or flea markets and find people who are selling, and offer to sell them your cake. It is still your responsibility to take care of the legal technicalities though, even if you would have virtually zero accountability as "that guy who shows up on weekends with a car full of cheesecake"
Posts
It's more a question of:
1 - Where do I sell to? Or OFFER to sell to?
2 - do I need to be incorporated, maybe as an LLC? I probably don't NEED to, but maybe it's a smart option.
Yeah, I agree with Tube. An LLC isn't really necessary.
My suggestion is to just come up with a name for your business and file it as a fictitious business name. You do this either with the state or the county depending on where you are. (Google "fictitious business name fill in your nearest metropolitan area here"). Then get some business cards printed up.
Make sure you keep an accurate accounting of income and expenses. You're going to want to declare this on your income tax at the end of the year, and for that you want to know exactly how much money you made and how much you received.
As for your first question, are there any coffee shops on campus? What about independent coffee shops around town? How about small locally-owned restaurants? If you have the time and determination to view this as a job: i.e., to bake a few desserts a day every single day, then you could probably pretty easily find a coffee shop or a little mom & pop restaurant who would be happy to put one of your cheesecakes in the cooler for customers. That's a good deal for them; if you sell them a cheesecake for $30 and they divide it into eight pieces and charge $5 a piece, they've just made $10 profit. And they don't have to worry about hiring a pastry chef. That's why you want a business name and business cards - you want to be able to drop off your cards at such places. And maybe some little samples, too.
Keep in mind that you have to treat it like a job if you go that route. You need to deliver consistent product every day or two.
the "no true scotch man" fallacy.
As far as coffee shops, no. But there are a number of smaller bakeries and coffee shops in Seattle. Granted, that's a little drive. But I could also go the restaurant route.
A coworker when I started at a games company was leaving to pursue music, but his ultimate goal was to open a small cafe/restaurant in Seattle. He said I have a standing offer to be their pastry chef if I ever decided to quit software. I've gotten enough praise for what I've made to think it's not just people being polite for its own sake.
The only thing is I'm a full time student, so I don't really want to do this EVERY DAY. I'd prefer to do it on weekends maybe and supply whomever wants then for the week. And yes, I know I'd need to keep track of everything.
which is pretty fucking funny, considering
WOAH WOAH WOAH. No. Stop. Forming an LLC isn't the first thing you need to do when starting a business, but it is absolutely necessary before you actually sell even a crumb. The liability involved in selling any manufactured goods (including delicious food!) is considerable, and doing business on even a limited scale without that basic protection is extremely dangerous.
Beyond granting you the ability to do business (i.e. accept checks) under a fictitious name, a D.B.A. provides absolutely no legal protection whatsoever. If your fictitious business gets sued and you lose? Yeah, they take your house and car. All it takes is somebody getting sick because of one of your desserts (say that jar of Peter Pan peanut butter you used happened to be tainted), and that's it, your life is ruined.
For the love of God, don't take that chance. An LLC typically doesn't cost much more than a D.B.A., so if you're serious about this, spend the extra money and do things right.
- You will make a loss or at the very best break even in your first year. Its a very lucky business that makes any real money year one.
- Dont under value yourself but look at your competitors. If you say you make very good cakes think about an initial promotion to get your potential customer hooked on your goods and off your rivals.
- Advertising, I wasted plenty of advertising in the wrong place. Keep it focused in a high potential customer area, in the first year you’re after building a regular customer base. What a lot of people forget is that advertising isnt just about getting new customers its also about keeping your existing customer aware that you’re about and still in the game, so remember to follow up advertise places you've already hit if they were successful.
- Keep at it, you'll never work as hard as when you work for yourself but it is totally worth it and rewarding even if you dont instantly make your millions.
- Give yourself a break, your human too and need time off. I started working 12 hours a day 6 days a week when it started picking up and I was still on my own, it almost killed me.
Thats all I got for now, im by no mean an expert but ive learnt by experience over the last 16 months, oh and keep records of EVERYTHING.
You realize, at least in the United States, you cannot just sell something you make in your own kitchen, unless it is inspected by the appropriate people.
I suggest looking into local churches and the like about renting out kitchen space, making large batches of these cakes, and going from there.
My house also has two kitchens, which is allowable.
But again, this is for a part time deal, not a full scale restaurant level operation I'm wanting to open.
So some of the suggestions here aren't entirely applicable.. at least yet.
Something where I have to go and wait around isn't something I want to do.
I am in school, again, so that's too much.
And it wouldn't save me from any of the other points brought up.
For the most part, I agree with Cardboard Tube regarding neville's plan. However, since other people might be reading this, I want to respond.
WP, your post depends very strongly on state law and the nature of any hypothetical lawsuits you're talking about. However, in most states, in the event of a lawsuit they cannot take your house or car unless you have significant equity on it (and in that case you can refinance and just pay the equity). Secondly, an LLC might not protect you from damages from a lawsuit arising from personal misconduct or negligence when you're the sole member and employee. There are a number of legal tests a court can take to determine whether they can "pierce the corporate veil" and hold you personally responsible for your fuck-ups despite operating as an LLC - again, this depends highly on the nature of the lawsuit and on state law. Third, the cost varies by state law; in some states doing business as an LLC will change your tax rate.
I'm not saying that an LLC is a bad thing. I'm just saying that it's a more complicated undertaking and not as cut-and-dried as your post implies.
the "no true scotch man" fallacy.
Granted, but I'm just saying it's extremely short-sighted to dismiss the necessity of an LLC entirely -- especially given that the OP would be entering into food services. Beyond that, though, I don't think it's worth arguing the point; it doesn't sound like the OP really has the time or capital to really pursue this.
Small businesses are a massive drain on time and money. My business is in a sector that's considered to have a very low cost of entry, and I still spent thousands upon thousands of dollars starting up. Sorry to rain on your parade, neville, but you'd almost certainly spend more than you made on this even if you didn't shell out the money to get your business 100% kosher legally. Even the bare minimum requirements of a food safety training certification, D.B.A. filing (and corresponding advertisement), business permits, and a city-issued business license (if required) will cost well into the four digit range. :?
An LLC is vital, especially when you are selling any product. It costs about 25-50 dollars in filing fees, and that simple act protects you a great deal. Piercing the coporate veil requires proof of intentional negligence, knowledge, and a lot of other things are too voluminous in content to discuss and still be helpful.
Advising someone to not start an LLC because someone can pierce the corporate veil is like telling someone not to get insurance on their car because if they drive drunk their provider won't cover an accident should it occur.
I think he should put together a plan, make a few cheesecakes, and test his profit margin - you'd be surprised how many extra costs you are unaware of, no matter how meticulous it is. If that works (sell those cakes directly to friends for cash, etc), then form an LLC and sell those cakes. Also, once you have a hundred bucks or fifty bucks or whatever, form a seperate bank account. That way if you screw up your money and how much you are making for whatever reason, youll be able to access those bank statements in perpetuity.
I don't mean to jump on anyone, but if you think that managing risk through forming llcs, etc., is not always necessary, it would be good to take a little deeper look into that area. I used to feel the same way (I had a DBA that i produced little plays and music and crap with), until I took a good hard look at the issue out of concern for liability and taxes. Anyone doing business should HAVE a business, otherwise you are setting yourself for disaster in this litigeous world from the get-go.
Any time someone says "you don't need an LLC/corporation" I can only help but cringe. So please don't feel like im jumping on you guys. Good luck, cheesecake guy.
Curious about this as I know it varies from state to state, but I'm looking to form a LLC in MA which apparently costs a staggering $500. Am I looking in the wrong place or what? $500 is a lot more than I'd be willing to shell out, especially for a very small business.
The Sixth Annual Triwizard Drinking Tournament Part 1 |
Pokecrawl Episode 4: The Power Of One!
Portalflip
Pokemon X: Atlus | 3539-8807-3813
http://mycorporation.intuit.com/promotional_offers/?cid=ppc_gg_incorporate&gclid=CJHmtubF0JgCFQpuGgodSBwR0g
Most companies don't incorporate in their home state. Delaware, Wyoming, and Nevada are all popular states to incorporate in because of low initial cost of filing, low/no taxes, and laid-back business laws. Wyoming, for instance, has no state corporate income tax, no minimum capital requirements, and meetings can be held anywhere. There's rarely a persuasive reason to file in your home state.
(but I did anyway. ._.)
Edit: After looking at meeker's link I guess that's all I need. Is that site legit?
The Sixth Annual Triwizard Drinking Tournament Part 1 |
Pokecrawl Episode 4: The Power Of One!
Portalflip
Pokemon X: Atlus | 3539-8807-3813
1. What is your target market? Are you making cheesecakes for small businesses or for individuals? This will drastically affect how much you can charge. I know where I live, I can get a whole cheesecake for $10, $20 for a nice one. That's probably very different from prices where you live, but keep in mind that in times like these people will be looking to save money, and you're providing something of a luxury.
2. How much does it cost for you to make a cheesecake? Keep in mind that you add up everything: materials, wear on your equipment/tools, time spent per cake. Are you going to deliver them? That's more time, gasoline, and wear on your car. If they have to pick them up, that's going to mean you can't charge as much.
3. How many cheesecakes can you make compared to how many are wanted? You'll probably need to produce a relatively high volume of cheesecakes to turn a profit (delivering 5 cheesecakes in a single delivery is much more cost effective than 1 cheesecake per trip, for example.) Might restaurants get cheesecakes/desserts in bulk from a supplier for cheap and freeze them? You could probably offer a similar deal, but you'd have to be sure to keep up with their demand or they'll probably just save their time by buying from the big manufacturer, regardless of quality.
Remember the first rule of supply and demand: firms are in business to maximize profit. If you can't help them do that, they're going to abandon you. If you're selling to individuals, you have more leeway, but that's a much less reliable source of sales.
It is Intuit, the makers of Quicken. They send out a bunch of junk mail to the business, so they must be selling the mailing lists, they also try to get you to buy services and extraneous crap, but it is all no pressure and completely optional.
Then go to these Farmer's Markets or flea markets and find people who are selling, and offer to sell them your cake. It is still your responsibility to take care of the legal technicalities though, even if you would have virtually zero accountability as "that guy who shows up on weekends with a car full of cheesecake"