How to be your own boss

With job security sagging even in traditionally stable industries, many Americans, by choice or necessity, are leaving the corporate cocoon to start their own businesses. Brian Headd, an economist at the Small Business Administration, says that the number of one-person operations rises when the economy is struggling.

Of the more than 600,000 companies started in the United States each year, only about half will survive for five years or longer, the agency says. How do you make sure you're among the winners?

-- Do the legwork. Passion and a market for what you sell are just the beginning. You need to find out all you can about the sector and analyze competitors' pricing and marketing.

That kind of legwork paid off for David Miller of Bethesda. After toying with the idea of starting a Web-based fantasy-sports game aimed at families, Miller, 36, attended the annual meeting of the Fantasy Sports Trade Association. Miller found that 40 percent of National Football League viewers are women. Because women tend to control the family budget, he figures sponsors and advertisers will want exposure to them.

Miller launched FamilyFantasySports.com in June 2008. He enlisted a partner and together they invested in the "low six figures" over a period of two years.

To keep costs low, neither pays for office space, and the company has relied on social-networking sites to gin up interest. Through Twitter they got on a local radio program, which landed them a deal with a sports merchandising company that provides prizes on their Web site to winners of competitions.

-- Write a detailed business plan. It may sound daunting, but the exercise will help you shape your idea. If you need help, seek out your local office of Score (http://www.score.org). The nonprofit partner of the Small Business Administration has 11,000 counselors who mentor small-business owners.

Such feedback was key for Sara Polon, who sells soups made from locally grown ingredients. After reading Michael Pollan's book on American eating habits, "The Omnivore's Dilemma," the 32-year-old started Souper Girl.

In the depths of the recession last year, Polon kept her old job while she developed a list of 50 vegetarian soups that passed muster. She invested $11,000 of her savings in a catchy Web site (http://www.thesoupergirl.com) and kitchen equipment. She rented kitchen space at a local restaurant that needed extra cash, enlisted her energetic mother to help (Polon says she was raised on soup), and spread the word. Polon made back her initial investment within four months.

Her soup, which sells for $12.75 a quart, comes with witty labels like "Ice Ice Vichyssoise Soup." Polon says she is attracting so many orders that she will hire her first full-time employee.

-- Get your financing in order. If you need a loan, your best bet is a small community bank or credit union, where you'll need a business plan to make your case to the loan officer. The economic slowdown has made lenders stingier, but the stimulus package provided the SBA with $730 million. Part of that money will be used to expand the agency's micro-loan program, which grants loans of up to $35,000 to small businesses.

To cover expenses while your business gets under way, you should have six months' to a year's worth of money in reserve.

-- Secure health insurance. This can be a challenge, but it may be easier to find coverage than you think, especially if you're healthy. Souper Girl's Polon, who has her own health insurance, pays about $150 a month to participate in a Blue Cross HMO. To familiarize yourself with what's available, check eHealthInsurance.com or Coverageforall.org.

-- Enlist financial expertise. Get a good accountant. You may be eligible for more than 100 tax deductions, so it's important to keep a meticulous record of what you spend. For guidance, download IRS Publication 334, Tax Guide for Small Businesses.

-- Save for retirement. As a small-business owner you won't have a corporate pension, but you can start a retirement savings plan. The main programs -- a Simplified Employee Pension (SEP) IRA and a solo 401(k) -- allow you to sock away pretax savings.

-- Kiplinger's Personal Finance