The First Rule Is: Know Yourself

Q: My husband died more than a year ago, and although I had little to do with running his business when he was alive, the court appointed me administrator of his veterinary hospital. Since his passing, the clientele has dropped off and revenue is down considerably. I have considered selling the business. If I keep it, I need advice on marketing and accounting. Can you help?

--Dorris S. Woods, Los Angeles

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A: You need to ask yourself an important question: What do you want to do with the rest of your life? It is very tough to grieve, adjust to being alone and try to run a business you are not familiar with--all in one year. First, determine if you really want to own this hospital and run it yourself. If this is not something you want to devote a lot of time to in the next several years, you should consider selling it.

A couple of things occur to me. One is that this type of business is built on expertise that is not easily transferable. The other is that veterinarians attract clients on the basis of personal relationships. People take their pets to vets they like and trust, just as they go to doctors and dentists they like and trust. Once that personal relationship is lost, it’s no wonder the clientele is going elsewhere.

Those two factors suggest you should probably sell, unless you have an overwhelming interest in running the business. You need to seek some good counsel, possibly from within the veterinarians’ associations your husband most likely belonged to. Why not call a few people in the industry you know and trust and set up an informal board of advisors for your business? Get their thoughts on the viability of the hospital and its sales potential, if you decide to sell.

Such a group could give you realistic advice and might form a pool of potential buyers, either sole practitioners who would like to move up to a hospital setting, or other animal hospital owners who might want to expand.

You should contact a business broker to do a financial evaluation of the business before you think about selling. Then list potential buyers and contact them all personally.

--Ann Ehringer, director, Family and Closely Held Businesses Program, Marshall School of Business, USC

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Q: I own a small marketing consulting business that I operate from my home. I now use a temp agency to supply administrative staff who work here, but I am considering hiring a permanent employee. What kind of insurance do I need to carry to be well-protected?

--Catherine Yeakle-Pyle, Redondo Beach

A: Hiring a first employee is one of the biggest hurdles a small-business owner will face, especially when the business is home-based. When you work from home, you typically have very informal procedures and operate on a highly entrepreneurial, free-flowing basis.

When you become an employer, you must become more methodical, especially about legal issues. As an employer--even if you hire only one employee--you move into a highly regulated arena, and California has some of the most stringent employer requirements in the nation.

Visit the state Employment Development Department and pick up a package of federal and state employer paperwork and compliance materials. That information should describe your basic requirements for workers’ compensation coverage.

You must also make sure that your home-based business is operating legally within your city and that you are licensed to do business out of your home.

Make sure you check with the broker who provides you with homeowner’s insurance, to make sure that your current policy will cover someone who works in your home. You do not want to find out too late that you are not covered for an accident or loss.

--Rica Burton, founder and CEO, Choice Professionals, Los Angeles

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Q: I am a college professor who would like to start my own Web page design and graphics company in order to segue into retirement from teaching. I have set up a home office, but I don’t know how to legally start the business.

--Patricia Lin, Upland

A: Every would-be home-based business owner should first check local zoning regulations to find out what permits and business licenses are required. The easiest place to start is at your City Hall in the business license and/or zoning departments.

With the growth in home-based businesses, some cities are getting smart and putting together information packets for business start-ups. The best of these are full-fledged kits that include checklists, addresses of places you will need to visit, lists of fees and forms for permits and fictitious business name statements.

Your next stop should be at your bookstore or local library, where a wealth of good books on assisting small businesses is available. The best of these include discussions of various alternatives for setting up a company--such as whether you want to form a sole proprietorship, a corporation or a partnership--and the tax ramifications of the various options. A talk with an accountant or financial planner who knows about small business would also be helpful.

The competition in the field of Web page design is growing rapidly, and there is a lot more to the business than some people realize. If you have a background in this kind of work, you will be ahead of many who think they know something about computers but are not qualified to design Web pages professionally. In my experience, you must be really good to grab a share of this rapidly growing market.

--Debra Schacher, CEO, Home Office & Business Opportunities Assn., Irvine

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If you have a question about how to start or operate a small business, please mail it to Karen E. Klein in care of the Business Section, Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016, or e-mail it to [email protected]. Include your name, address and telephone number. The column is designed to answer questions of general interest. It should not be construed as legal advice.