Forgot to mention - starting a small business is pretty risky - something like 85% of them fail in the first year or two. It's also a lot of hard work - doing your research before startup and then running and managing the business after startup.
Case in point: My wife has wanted to own her own nail salon ever since we got married and she came to the USA from Vietnam, some 8 years ago. She has worked in various salons for those 8 years, learning the business from the inside, but not the management so much (typical in that industry). So we have been looking for the last 3-4 years for a good opportunity, now that salon prices are down thanks to the economy.
To make a long story shorter, we finally bought a salon near our home last May, that had a pretty good crew of nail techs and established customer base. Neither of us had any prior experience in running a small business, so I concentrated on getting a lawyer to prepare the purchase contract, etc and didn't spend enough time on other areas such as the credit card machine (rather essential for a business like salons as 2/3rds of the customers use charge or debit card transactions to pay). Consequently we're stuck in a 48 month rental agreement with Wells Fargo First Data Corp. paying $30 a month rental, when I could have bought the fancy-pants machine (has a quad-core processor and 32GB flash memory) for about 1/4th of the total rental cost (and we don't even own the machine at the end). Plus we're paying too much per transaction, over 2% total, so that amounts to around $600 a month right there. Using a lesser-known company we could have gotten in around 1.5% or maybe a bit less.
The salon is kinda old, although the prior owner updated the equipment and painted/carpeted it a couple months before we bought. All the plumbing is on one side of the shop, so some previous owner (Vietnamese) who wanted to install a facial/eyelash extension room had to put in a sink on the other side. So there was a jury-rigged bucket under the sink, with a pump connected to a wall switch, to pump out the bucket through a 3/4" pipe running up the wall, across the drop ceiling, to the bathroom drain pipe on the other side of the shop. People would forget to turn on the pump or else let the faucet drip, so occasionally there would be large puddles of water in the facial room. Anyway, I thought "Geez - why not just use a sump pump with a float valve to automagically empty the bucket". So I bought a Flotec sump pump (made in China) that the Home Depot guy said was a good, trouble-free brand. Turns out it featured a metal threaded shaft from the motor that screwed into a plastic impeller, no metal bushing used, so after 6 weeks of operation the shaft had screwed itself into the plastic far enough that the top of the impeller contacted the underside of the plastic housing, and then jammed solid. Typical Chinese crap - saved 2 cents on a bushing, nevermind the customer being out $130. The motor had a thermal breaker but not a current-operated breaker, so by the time my wife called me to complain the pump wasn't working, not only was there water all over the floor but the motor had practically boiled the bucket of water. We had bought a all-in-one washer/dryer that I rigged to also empty into the bucket, so the pump got used maybe 5-6 times a day.
There's other areas where we could have saved some money and/or grief had I had the time to do the homework in advance (I have my own professional career to mind, after all). For example, the salon has zero insulation above the drop ceiling, about 3 ft. below a flat metal red-painted roof, and this summer (hottest on record I think) my last 2 electric bills for the HVAC were well over $600 a month. So after working on the damn plumbing once again tomorrow (hopefully a permanent solution this time - I bought a made-in-the-USA Zoeller all-cast-iron sump pump that is expressly for washing machine effluent), I plan to either install batt insulation or more likely go the quick & dirty route and just use blown-in insulation above the drop ceiling.
Well sorry for the long anecdote, but the takeaway here is (1) do your homework as much as possible before starting a business, and (2) avoid buying crap from mainland China 😛. My wife, being Vietnamese, is quite familiar with Chinese products - comparatively low prices but poor quality or design.
Come to think of it, if I retire in the next 10 years I'll write a book on how not to run a nail salon business 😀.
Luckily despite all the problems the salon is pretty successful, and makes a decent amount of money now that most of our major expenses are done, but it also means my wife works there 7 days a week, and myself on call to rush from my office 25 miles away to take care of emergencies such as when our Comcrash cable modem and phone modem both quit working so that we couldn't take credit or debit card charges or phone appointments until the tech arrived the next day. Got them to replace both modems and now everything is fine, but they didn't like me shorting them on the rental by $75, which is about 1/10th of the lost business I figure. Told them that if they didn't like it, they can complain to my lawyer..
This winter we'll do some more renovation/painting/new signage and I plan to start advertising on FB, Groupon, Yelp, etc, maybe even start up a website since Comcast will host it for free. The previous owners were not too e-savvy and use traditional advertising in neighborhood flyers, etc. Nowadays a lot of people browse on their smartphones for services..
But thanks.. I bounce a lot of my stuff off two CPAs and investors.
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