You Asked, We Answered . . .

Should a Newly Divorced Mom Use Her Savings to Start a Business?

Q: Dear Making Bread, I stumbled upon your magazine by fate. I say by fate, because I'm in the middle of ending my 10-year marriage, and I'm very worried about what I will do to support myself and my kids. I decided to use the $5,000 I have saved to start a little business. I want to start a neighborhood laundry service. “Pick and Drop” is what I will call it. I want to offer services to busy mothers by picking up their laundry, doing it for them, and then dropping it off. I’ll also offer housecleaning services. But I'm not sure how to go about offering my services and pricing them. I have acquired three customers, but I don't think I'm charging them properly. I need advice as to how I should go about researching this business idea. I can't afford to make a mistake. Thank you.

New Lease on Life

A: Dear New Lease, thanks for contacting Making Bread. We wish you all the best as you make the always difficult transition through divorce and applaud your initiative in trying to start your own business. Below, we’ve gathered a few leads to point you in the right direction when starting your business. But, first, we do want to caution you not to put all of your eggs into this one basket.

            It might be wise to consult a financial planner before you do anything with your savings. Initially, perhaps you should consider placing it in a money-market savings account, where you’ll have access to it if you need it for emergencies, but where it will begin to earn some interest for you.  

            We recommend that in the beginning stages of your business you invest the minimum, financing it as you go along by plowing the profit you earn back into the business, upgrading equipment, marketing your services more aggressively, etc., only after you begin to bring money in. We’ve interviewed many businesswomen for the magazine and the majority of them say they took it slow and relied on savings to see them through personal emergencies while their business grew.

            Visit www.garrettplanningnetwork.com to find a financial planner in your area who might be able to advise you in greater detail. Many of the planners registered with this network offer very reasonable hourly rates.

            You’ll probably want to establish yourself as a sole proprietor for tax purposes. Check out www.legalzoom.com for information on how to do that. You should also consult www.sba.gov, the Web site of the Small Business Administration, which has a lot of resources for small business owners just started out. SCORE (www.score.org), an organization of retired business owners, offers free advice, which can be very useful. Locally, you might want to network with other small business owners for support and advice. Find them at http://www.nawbophila.org/.

    Again, we wish you much luck. Keep us posted on your progress!

___________________________________________

This answer was prepared by the staff of MAKING BREAD. All subscribers have unlimited free “Ask the Expert” questions answered.

E-mail this article.