Barking Up the Wrong Tree

Cheryl was an administrative assistant in a medium-sized company that was feeling the effects of the recession. She knew that staff cutbacks would be announced eventually and rather than take the chance of competing in a tight job market, she planned to open her own doggie day care business.

She had the space. In addition to a large, fenced-in backyard, her home had a finished basement that she could easily transform into an indoor canine castle by throwing some old pillows, rugs and blankets down. She realized that her love for dogs was not enough experience in and of itself, so she enrolled in a dog-training course and read a lot of books about the nature and behavior of different kinds of dogs. She spent a few weeks talking to dog owners she knew and asked a friend who worked in a veterinarian’s office for referrals, so she felt that she had a good start on a client list. She had the forms for her business license, and the appropriate amount set aside to pay the necessary fees.

By that time, Cheryl wanted to just jump right in and launch the business. But then a friend asked her about liability. What if a pet got hurt in Cheryl’s care? What if an owner slipped and fell when they came to pick up their pet? With visions of lawsuits that would put her in financial ruin, she held off to do more research.

First she looked at her homeowner’s insurance policy. She had assumed that since her business was at her home, anything that happened there would be covered. When she realized that wasn’t necessarily the case, she called to find out what kind of additional insurance she would need.

Next she contacted her accountant cousin to guide her in creating a business plan. That process made it clear that she had to look at the business in six-month increments, rather than one transaction at a time. Did she have a cash cushion if business was slow? How much would she need in reserve to see her through a bad month? How much did she need to charge to meet her self-employment tax obligations? What were the costs of building and maintaining a website, or of advertising her business? What kind of office equipment would she need to buy?

Cheryl originally thought all she needed was a good idea and a small investment and everything would take care of itself. Once she realized how much she didn’t know and wasn’t yet prepared for, she readjusted her thinking.

With a solid business plan and the right kind of insurance, Cheryl was ready when those company cutbacks did come around. Strangely enough her job was spared. But she told HR to give her position to someone who didn’t have a better plan. She walked out the door and into a brand new life as the owner of a successful home-based business.

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