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Does Your Small Business Need Licenses or Permits to Operate?

 

Before your business starts selling its products and services, you may need to have certain licenses or permits to legally operate. Licenses and permits are often for the protection of customers. Some are to identify you and your business for the collection of sales, local, income and other taxes. Federal, state, or local licensing and/or permit requirements might apply, depending on the type of business and where you’re located.

You definitely don’t want to find yourself not in compliance with the regulations. If you fail to maintain the required licenses or permits, you could face some hefty fines and penalties, or you might be forced to stopped doing business.

 

Where do you start your research to figure out if your business needs to have licenses or permits?

You can start by visiting the Small Business Administration’s website. On the site, you’ll find information about the federal licenses and permits required of businesses operating in certain industries, including transportation, agriculture and alcoholic beverages.

The SBA website also provides an online list of links to where you can find specific information about business licenses required in your state. On that list, you’ll find Maine.gov’s website, which walks you through how to get a business license in the state of Maine.

Individual towns, cities, townships and counties have their own requirements. Generally, the best way to find what applies to you is to contact the offices directly or review the information on their websites (be sure to confirm with them that the information is up to date). Throughout Maine, general licenses to operate businesses are handled at the local town or city level. For information for the city of Portland, click here.

As you research and complete the paperwork to obtain the licenses and permits you need, make sure you give yourself some time—and expect to exercise some patience. The registration process could take days or months or longer, depending on the nature of what you’ll need. For example, to gain zoning clearances, it might take up to a year if you meet resistance and hearings are required.

Although figuring out what requirements will apply to your business may seem daunting, remember professionals and resources are available to help. Consider consulting with an attorney to make sure you know what you need to do to be compliant. SCORE mentors are here to help you cut through the confusion. Contact us today to schedule an appointment with a mentor who is knowledgeable about your industry and can help you move your business forward.

5 Common Mistakes When Starting a Business

Starting a business comes with a learning curve – often a steep one. There’s a lot to consider, research, and execute. It’s not surprising that new entrepreneurs make mistakes along the way.

According to Alan Shaver, a SCORE Portland Maine mentor for the past 15 years, there are five key mistakes many new startup business owners make.

If you or someone you know is starting a small business, knowing what missteps to watch for can help you avoid getting your business off on the wrong foot.

Top 5 Mistakes New Business Owners Make

 1.   Underestimate the time, effort, and energy required to start and run their businesses.

“They don’t realize it will be as all-consuming as it is,” explains Shaver. “They underestimate the demands it places on them, particularly how it will impact their family relationships and their financial resources.”

He says a lot of people going into business fail to estimate that accurately, so he encourages new entrepreneurs to connect with existing business owners in similar types of businesses who have gone through the process. That can serve as a helpful reality check.

  1.  Fail to conduct sufficient research about the industry and their type of business.

Without researching the business arenas they’re entering, new entrepreneurs often don’t have an adequate understanding of what they can expect.

Shaver explains, “A lot of people don’t want to do that kind of work, but it’s necessary to understand their business and the industry in which they’ll operate.”

“SCORE counselors direct them to various resources to enable them to learn a great deal about their proposed business and its industry.”

One that Shaver regularly shares is an online resource available at the Portland Public Library, Reference USA. It offers a wealth of information to help new business owners understand the metrics, price points, margins, and more that are usual for their types of business. Reference librarians can also assist new entrepreneurs in researching their industries.

  1. Understand the potential limitations of their business.

Will your business be able to sell enough to meet your income needs? Does your location provide an opportunity for growth? What qualifications do your employees need?

The above are tough questions to begin to answer unless a new business owner does financial projections and talks to others in the industry to learn from their experience.

“I had worked with a client who had a successful restaurant with a strong clientele, but his location wasn’t large enough,” shares Shaver. “As a result, he couldn’t turn tables fast enough and couldn’t achieve the revenue goals he wanted to. Sadly, he closed his business. If he had done more homework about the efficiency of a venue his size, he might have chosen a different location and remained in business.”

Similarly, but fortunately with a more successful outcome, Shaver also worked with a thriving coffee shop client who decided not to open another restaurant because he did his due diligence and projected he wouldn’t turn a profit until after three years.

According to Shaver, SCORE mentors help new entrepreneurs tackle challenges like those. They can facilitate connecting new business owners with existing business owners, and they also point entrepreneurs to the Financial Projections template on the SCORE website. By taking advantage of those resources, startups can make better decisions.

  1.  Fail to develop an adequate business plan, specifically the financial projections. 

“A lot of people allow themselves to be overwhelmed about creating a business plan,” says Shaver. “At SCORE, we encourage them to do it in small steps – to tackle it in reasonable workable bites.”

According to Shaver, seriously thinking about your business finances is crucial.

Will you make the money you intend to – or need to – make? Will you be able to pay back your investors and lenders?

Only by preparing realistic financial projections can you determine the appropriate capitalization and most efficient operation of your business.

“Business plans help you measure your own progress against your goals. It’s important to remember a business plan is not cast in concrete. You can change it as you learn more, but it’s essential so you can track if you’re achieving what you set out to do. And if it isn’t working, you need to explore why isn’t it working.”

SCORE provides tools to help entrepreneurs development business plans (such as templates for the narrative portion and financial projections) and offers workshops to guide them as well.

  1. Neglect to review and understand the financial performance of their businesses.

When new business owners don’t obtain financial reports and pay attention to them from the outset, there can be disastrous results.

Shaver warns, “If you don’t look at financial results regularly or faithfully. You don’t really know the score. You’ll have no idea if you’re winning or losing.”

“When small businesses are not winning, they need to figure out why – before they run out of money.”

Shaver encourages new entrepreneurs to reach out for assistance from SCORE counselors to understand what their financial statements reveal about the performance of their businesses.

Bonus Tip:

This doesn’t apply to all entrepreneurs, but if you’re going to have a partner in your business, Shaver recommends getting a written agreement in place from the beginning.

“It’s absolutely essential to have a written agreement that defines ownership and responsibilities. Do it upfront because waiting until there are disagreements or problems in the business relationship is too late

About Alan Shaver

  • Shaver has been a SCORE Mentor for 15 years. He leads several workshops at the SCORE Maine Chapter in Portland.
  • Now retired, he was a corporate lawyer with a large law firm in New York and had a private law practice that served New York and Connecticut. For ten years, he was also a partner in a franchise auto service business in Maine.
  • His areas of expertise include business planning, financial projections, and business funding.
  • One of Shaver’s SCORE clients, Garbage to Garden, was nationally recognized by the SCORE organization as “2014 Outstanding Green Small Business.”