An entrepreneur is one who organizes, manages, and assumes the risks and responsibilities of a business. Rather than getting a regular job, your grand family member may prefer to start a business and become an entrepreneur. Selling a product or performing a service for others may be a viable way to make income. If your young person is in school or training, having a business may offer a more flexible schedule, a chance to set goals and earn income based on how much production can be done. If the business is successful, word of mouth may help bring in new customers.

There are many things to consider when starting a business. Help your young friend fill out the questionnaire right here on this page in order to evaluate whether starting the business is a good idea. Or you can use the printable version to work it out on paper.

Mini Business Plan

What product will you sell, or what service will you perform?

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How much will you charge for it? If a service, will you charge by the hour? By the week? Or by the task done?

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Survey some potential customers. Do they think this is a fair price?

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Where will you find customers?

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How will you advertise? Will you make and distribute flyers? Put up notices on bulletin boards or start a blog? Let people know by word of mouth? For example, if you are tutoring younger children, you might let parents and teachers know.

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Are business expenses required to get started? For example, if you are mowing lawns or doing landscaping, do you need to rent a lawn mower and other equipment? Or if you are making homemade greeting cards or knitting potholders, do you need to purchase raw materials?

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How much will getting started cost?

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How will you cover these expenses? Will you borrow the money from a parent or guardian with an agreement for paying it back?

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If there are expenses, are you charging enough to make a profit? Which ones are fixed – the ones that are the same no matter how many customers you have, and which are variable – those that relate only to the customers you have.

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How will you collect your fees? You will need to make agreements with your customers up front about when and how they pay.
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What if you have difficulty getting paid? Most people will pay you right away. But if for some reason they don’t want to pay for the job, find out why. Do they think you didn’t adequately perform the service? If so, how can you fix it?

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If they just don’t have the money right now, ask when they will have it and make an appointment to come back to collect. If you are still not getting paid, ask your parent or guardian to step in to help.

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How will you keep track of your production and your income? Will you set up a spreadsheet on a computer? Or will you mark everything in a ledger book? Decide on a system that shows what you produced, the date you produced it, how much was paid for it and when.

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Based on how much you bring in from each customer, how many customers will you need to have each day/week/month to earn enough to justify your time and energy.

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Having a business requires one to be very self-disciplined because no boss is demanding that you show up on time. However, for someone who is enthusiastic and self-motivated and wants to please customers, it can be fun to see how much production can be done in a week. Your young friend can graph net income (gross income minus expenses) week to week to see how the business is doing. Make adjustments if the net income is falling off.

Tip: Tell your young friend this: Always do the very best job you can. You want to earn the reputation of providing excellent quality, on time, with a great attitude. This work ethic carries you far beyond just one day’s job. Word of mouth spreads your reputation, and other people will think of you when other opportunities arise.

Check with your accountant about current IRS rulings on how and when to tax a child’s income.
If a child makes more than $400, from his or her own business, the child has to pay self-employment tax, but may not have to pay income taxes. For the year 2005, a dependent can earn up to $5,000 and not have to file a federal income tax return and pay income taxes.

A whole different set of rules apply if the child works in the home of someone as a nanny, gardener, and so on. Your accountant can advise the parent or guardian on how to report the child’s income. Check www.IRS.gov for more information.