The Food Truck Business Model

21 07 2010

It’s an understatement to say that food trucks are all the rage because it’s literally a “movement.” And really, this isn’t surprising as small businesses and entrepreneurial start-ups are thriving in this economy. Food trucks are the epitome of small, mobile, adaptable businesses going after their target markets.

Notably, a GPS-oriented Food Truck App launched this spring, debuted by the company that leased Kogi BBQ its first truck and helped kick off the nouveau food truck craze. Roy Choi of Kogi BBQ is also one of Food and Wine‘s Top Chefs of 2010 (check out his business tips). Additionally, the Food Network is premiering its new show Food Trucks later this summer on August 15, 2010. So it’s already been a big year for food trucks! And as cities across the county take pride in their favorites, this national sensation not only bolsters the local economy, tourists flock toward them too.

So what does it take to run a food truck? Well, the biggest seller for jumping into the market is mobility and a somewhat lower initial capital investment – over a brick-and-mortar restaurant. But as every entrepreneur will tell you, it’s easy to run after tangents that spider off of an original business model, that is if you have one. Inc.com posted an informative article about “How to Open a Successful Food Truck,” which also included a number of operational considerations such as city permits, insurance, and parking fees. New York Magazine also published an article on “How to Start Your Own Food Truck,” noting start-up operating costs and acquiring/retrofitting a truck as significant measures to acknowledge.

Probably one of the most influential contributors to the making of a successful food truck culture in any city are the street vendor licensing and permitting requirements. The Seattle Times recently posted an article in its Retail Report about how the Mayor plans to recommend street food rule changes to the City Council. “Street Vendors” are even qualified as a characteristic of a thriving business district by the Seattle Office of Economic Development. Yet, a number of strict regulations imposed in the 1980’s have limited Seattle’s street food scene to a minimal number of trucks and a battalion of hot dog, popcorn, and espresso vendors. Check out the main changes being proposed here. There’s a mixed emotion for the relaxed rules, given the potential for increased business competition. And there may be a few learning opportunities from Portland’s street food scene.

Regardless, food truck entrepreneurs have mastered the use social media to create consumer demand and a loyal following. They’re experts at building relationships and communities of fans – who wouldn’t want to discover their tricks? (See Mashable‘s video and Forbes‘ article.)

In Seattle we’re fortunate to have a wealth of fresh, local, and creative food – it will be interesting to see how a bigger food truck scene reflects this. And with our successful farmers market culture, I wonder if the mobile CSAs of New York City will make their move West – will truck farming be the next movement?

Photo courtesy of ibeginz.

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Hiring and Recruiting

6 06 2010

In this economy, it’s great to hear that manufacturing and service service sector companies are expected to add to their payrolls at a much higher rate in June 2010 than they did in June 2009, according to a recent survey by SHRM. The survey also indicated that small business hiring also grew in May 2010. In fact, a Small Business Administration economist even mentioned that small businesses are adding workers as net job losses in the economy as a whole persist. In the aggregate, we’re not seeing dramatic changes, but we’re at least seeing changes in a positive direction.

As with any business, especially a small one, recruiting and hiring the right people for your business is crucial. I’ve previously written about the “Science of Hiring,” particularly the costs associated with a bad hire. Knowing when to hire and how to go about doing so is just as important as picking the right candidate for the job. Growing your workforce  is an investment, so it makes sense to have a tactical approach to hiring.

Knowing when to hire is key. The idea that a new employee will offset your workload and generate new revenue for your business is surely enticing, but it comes at a cost. Thus, it’s important to hire when your cash flow is positive and when you have a cash management process that minimizes the worry associated with cash shortages. Aside from an employee’s regular pay, you’ll need to consider several costs related to employment. Often times, these costs amount to 30-40% of the employees base pay:

  • Federal and State payroll taxes – including Social Security/FICA, Medicare, unemployment, and workers compensation.
  • Employee benefits – such as health insurance, retirement savings plans, life insurance, and long term disability insurance.
  • Cash-flow projections associated with your employee’s pay periods.
  • Employee workspace and computer system use.
  • Hiring and training costs.

Know what position you want to fill. It’s worth stopping to think, “do I really need to hire someone?” Many services can be outsourced or done by free-lancers; this work may include accounting, manufacturing, website design, marketing and public relations. Deciding what tasks to outsource and what to hire an employee for may come down to whether the work lies within your business’ core areas of strength and whether that function is needed on a regular basis. Choosing a position to hire is not just about offloading chores, it’s a decision about the path of your business’ growth.

Know what to expect from your new hire. Before you advertise for help, sit down and write a job description. Job descriptions are communication tools, set yourself up for a great working relationship by being able to clearly articulate the job to all applicants. This document presents an excellent guide for developing effective job descriptions.

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Small Business Resources in Washington

23 04 2010

Here are some great resources for entrepreneurs and small business owners in Washington. It’s always nice to have a go-to list, so here’s a start. And if you have any favorites that I’ve not listed, please comment and share! Think big and act strategically.

Start & Grow a Business in Washington:

  • Choose Washington – Providing technical and financial assistance to communities and businesses for trade and economic development, to encourage retention and expansion of employment and operations in the state of Washington.
  • Washington Guide for Small Business 2010 – This directory assembles, in one handy reference, information on organizations, services, and programs throughout the state to help Washington businesses survive.
  • Access Washington: Plan a Business – Understanding who to turn to for research and planning, business advice, financial assistance, regulatory information, and the basics of running a small business is vital to your success.
  • Washington Small Business Development Centers – Promoting economic vitality by providing advice, training and research to entrepreneurs and existing businesses statewide.
  • Washington State Office of Minority and Women Owned Businesses – Develops programs designed to improve the contributions of minority and women-owned small businesses to the Washington State economy.
  • Community Capital Development – A consortium of non-profit community development organizations that provide technical assistance, training, counseling, and loans.
  • Seattle SCORE – Providing free and confidential one-on-one business consulting  for interested individuals.

Legal Resources:

Local Networks & Connections:

News & Current Topics:

National Associations:

Photo courtesy of Topikito.

largest and most diverse network of influential business leaders in the Puget Sound region.




Business Legal Structures 101

19 04 2010

Choosing the legal structure of your business is not only important, it’s crucial to determining how you operate your business. The legal entity you choose will affect how much personal liability you face, how much you pay in taxes and how in-depth your new company’s record keeping will need to be. It’s basically the bare bones structure of your business – you need it in order to execute your vision.

Hopefully, if you feel like you’re at a fork in the road, this post may lend some clarity. The following list includes the eight basic business entity types:

  1. Sole Proprietorship;
  2. Partnership;
  3. Limited Partnership;
  4. Limited Liability Company (LLC);
  5. Corporation (for-profit);
  6. S Corporation;
  7. Nonprofit Corporation (not-for-profit); and
  8. Cooperative.

The best entity for you will depend on the type of business you want to run, your potential exposure to lawsuits, the number of owners and whether you want the ability to raise capital or transfer shares. It’s smart, and in many cases necessary, to consult a lawyer or accountant when making your choice.

Based on several great resources that I referenced at the base of this post, I’ve listed below the characteristics, advantages, and disadvantages of each entity below, including the relevant tax related information.

Sole Proprietorships and Partnerships:

For many new businesses, the best initial ownership structure is either a sole proprietorship or — if more than one owner is involved — a partnership.

Sole proprietorships and partnerships make sense in a business where personal liability isn’t a big worry — for example, a small service business in which you are unlikely to be sued and for which you won’t be borrowing much money for inventory or other costs.

Sole Proprietorships

A sole proprietorship is a one-person business that is not registered with the state like a limited liability company (LLC) or corporation. You don’t have to do anything special or file any papers to set up a sole proprietorship — you create one just by going into business for yourself.

Legally, a sole proprietorship is inseparable from its owner — the business and the owner are one and the same. This means the owner of the business reports business income and losses on his or her personal tax return and is personally liable for any business-related obligations, such as debts or court judgments.

Advantages of a Sole Proprietorship:

  • Easiest and least expensive form of ownership to organize.
  • Sole proprietors are in complete control, and within the parameters of the law, may make decisions as they see fit.
  • Sole proprietors receive all income generated by the business to keep or reinvest.
  • Profits from the business flow directly to the owner’s personal tax return.
  • The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship:

  • Sole proprietors have unlimited liability and are legally responsible for all debts against the business. Their business and personal assets are at risk.
  • May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans.
  • May have a hard time attracting high-caliber employees or those that are motivated by the opportunity to own a part of the business.
  • Some employee benefits such as owner’s medical insurance premiums are not directly deductible from business income (only partially deductible as an adjustment to income).

Federal Tax Forms for Sole Proprietorship: (only a partial list and some may not apply)

  • Form 1040: Individual Income Tax Return
  • Schedule C: Profit or Loss from Business (or Schedule C-EZ)
  • Schedule SE: Self-Employment Tax
  • Form 1040-ES: Estimated Tax for Individuals
  • Form 4562: Depreciation and Amortization
  • Form 8829: Expenses for Business Use of your Home
  • Employment Tax Forms

For partnerships and the remaining business entities, read below.

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Legal Resources For Startups and Entrepreneurs

5 03 2010

A couple of lawyers at Davis Wright Tremaine LLP write a Startup Company Law Blog that I’ve enjoyed reading. Legally speaking, this is a great hot spot resource for legal business information, particularly in Washington state.

However, it was just today that I noticed a link on their “Noteworthy Blogs & Sites” list: Legal Resources for Startups. This resource list is offered by Read Write Start, which is sponsored by Microsoft BizSpark, a program designed to help accelerate the success of early stage startups. So it goes without saying that there’s a bit of money and work going into what is presented. Regardless, this post has a really nice offering of blogs, articles, websites, Venture Capital tips and other online resources for entrepreneurs and startups. It’s important to have information like this at your fingertips. And I even enjoyed the site’s links to the “Top 10 Reasons Why Entrepreneurs Hate Lawyers” and “How to Work with Lawyers at a Startup.”

I hope this post serves to be helpful, and possibly a part of your business reference toolbox. It’s now a part of mine, in the “Go to the Source” list in the right column of my blog.

Photo courtesy of North Bay Biz.





Managing Volunteers

10 02 2010

Alright, making do with less has motivated us all to find efficiencies in many aspects of our lives. And when it comes to getting the job done at work, doing more without impacting the bottom line is always a bonus. So when it’s time to commit to additional staffing, it’s important to distinguish between employees, interns, and volunteers.

Volunteers. Summed up, a volunteer can be defined as “a person who voluntarily offers himself or herself for a service or undertaking,” or “a person who performs a service willingly and without pay.” Legally, a volunteer can be defined as “a person whose actions are not founded on any legal obligation so to act.” So volunteerism lies in the absence of a contract and the absence of a subordinate type of relationship – a volunteer is simply someone who wants to help out, is free to come and go as she/he pleases and is not rewarded with money (with the exception of reimbursements ) nor training in exchange for the tasks carried out.

In 2009, volunteerism in the U.S. rose to include about 26.8% of the U.S. population, or 63.4 million people. Among the notable statistics, this increase was driven by women, and employed people volunteered at a higher rate than the unemployed. Furthermore, a survey indicated the following volunteerism habits:

  • People aged 35 to 44 are most likely to volunteer;
  • Married people and parents of children under 18 are more likely than the single or childless to volunteer;
  • Fund raising is the most frequently cited activity engaged in by volunteers; and
  • Most volunteers give their time to only one organization.

With so many people wanting to help out and your time stretched thin, where can the efficiencies be found? Well, upon managing volunteers and volunteering programs, for an organization and its volunteers to benefit the most from each other, volunteers should be managed as part of an overall, systematic program, somewhat similar to the systematic approach that should be used to managing employees. And to learn about or adapt an existing program, the Free Management Library has truly put together the best list of resources on the subject. This resource includes a number of articles on a dearth of relevant information, including:

  • Deciding whether your organization needs volunteers;
  • Designing and operating your volunteer management system;
  • Role of volunteer managers;
  • Legal and risk considerations;
  • Policies;
  • Volunteer job/task descriptions;
  • Volunteer recruitment and screening;
  • Training and supervising volunteers; and
  • Assessing volunteer management programs.

Don’t get caught turning down volunteers simply because you don’t have time to manage them otherwise. As I mentioned earlier, volunteers are eager to help. And there are more of them willing to do so these days. Recognize the opportunities a part of your organization that could benefit from volunteer work and set up a systematized approach for managing their efforts. Surely, both you and your volunteers will appreciate it.

Photo courtesy of Be Brilliant.





Sales Tax Compliance.

6 02 2010

Alright, I’ve mentioned this before. In this era of increased economic sensitivity, governments are looking for further ways to ensure tax payment compliance. With regard to resident businesses, my recent post about paying use taxes is just one measure.  Sales taxes include another measure, and they can be tricky to determine.

Collecting sales tax is a monster of a time sink for small businesses to wrap their hands around, but an important one to figure out (especially if you don’t have a software system to do it for you). And as a reminder to Washington businesses, “reseller permits” issued by the Department of Revenue have replaced “resale certificates” as of January 2010. So to whittle down what may appear to be a complex issue, here are a few generalities a part of collecting sales taxes:

I hope this helps filter the relevant tax information applicable to your business. Washington state has several useful tools to help your business remain compliant – though, keeping up to date could be one of the hardest tasks; even big-box stores can’t get it right. For any further questions about filing your tax return, or new laws, rules, and notices, check out the Washington State Department of Revenue’s most recent Tax Facts publication (it comes out twice a year).

Here’s to regulatory success in the new year.

Photo courtesy of the Washington Office of the Secretary of State’s blog.