Getting Down to Business (your own)
By Kelley Bell |
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Motivations for starting one's own business are many. Maybe you were recently laid off, or perhaps, like Todd and Matt Meister, you are finally presented with the perfect location at the perfect price to enjoin the business endeavor you have always dreamed of . . . or maybe you just want to tell your crappy Michael Scott-like jerk of a boss to shove it, and take some chances on your own.
While many have the dream, only a few dare to do it ... and of those who do, only a very small few prevail.
Statistics on the success of small businesses vary by industry, but for the most part, well over half will fail within the first three years, and less than 35 percent will still be in operation after seven years.
But don't let that scare you off; with proper planning, a powerful work ethic, and a good idea, you can beat the odds and succeed.
Americans are known for their ingenuity, and when the jobs dry up as they have lately, a lot of brave and daring people get busy and create their own means of employment. But is this the right time to launch? It's a wonderful thing to take that leap of faith and live your dream, but it sure sucks to fail - and lose your savings in the process. So how does one build a successful start-up? Here are a few tips that might help:
Five Steps to Starting (and Keeping) a Successful Business:
1. Write a solid business plan
The most common and fatal mistake that entrepreneurs can make is to rush in like fools without putting their plan on paper. Having the idea in your head, no matter how well thought out, is like building a house on the beach. Those sands will shift, and your foundation will eventually crumble. Putting the plan on paper makes it strong, and gives you the foundation you need to build something rock solid.
"The most important reason to write a business plan is to research, plan, and analyze how best to develop, start, and manage your business," said Mary McCarthy, chapter chairwoman of Columbus SCORE, to attendees at a recent small business conference.
"If you skip this step, how do you know where you want to go? While [venture capitalists] are not interested in a business plan, banks are. They also do not tend to read the business plan, but they want to know you went through the process and have defined your concept, customers, and competition."
"The elements of a good business plan include an executive summary describing the business and several financial worksheets," continued McCarthy. "Fill-in-the-blank business plan templates are widely available. Most will include sections on marketing, operations, management, start-up expenses, and some form of personal financial statement."
"A business plan is not worth anything without a SWOT analysis: strengths, weaknesses, opportunities, threats," advised Andy Gruenbaum, owner of SignsSeen.com and former SCORE counselor. "If a business plan doesn't defend these points, it is not likely to go very far."
2. Network, and leverage your resources
Once your plan is written, the next step is to network with the business community. Scope out the competition. Visit your local SBA (Small Business Administration). Ask about business incubators like Tech Columbus, and learn about office sharing co-work facilities, like The Sandbox. Find free consulting resources, such as the SCORE program. SCORE is a group of retired executives and business owners willing to volunteer their time to help others succeed. In addition to this "old school" advice, you should also learn a little bit about New Media and social networking on the web. The book Trust Agents by Chris Brogan and Julian Smith is a fine place to start.
3. Brand your business
Branding is an important part of any business endeavor. A short, easy-to-remember name for your company, a clean logo that looks good in black-and-white as well as color, a memorable tag line to describe what you do - these are all aspects of branding that must be planned carefully, and used consistently. On average, a consumer needs to see your branding seven times before they will internalize and remember your message. Many start-ups make the mistake of playing around with the design of their brand, changing it so often they never manage to embed their company identity successfully within the community. The rule here: Keep it simple, keep it clean, and keep it consistent.
4. Raise investment capital first
Everyone wants to start their business with a million-dollars-worth of start-up funds, but that's not reality. Entrepreneurs are the daring breed who take what they've got and stretch a buck, making big things happen on shoestring budgets. But it must be said that acquisition of operating capital is a major factor in the fate of any business. If you want your dream to make it past that seven-year marker, finding sufficient funding to help you over the humps is key.
5. Know your strengths
Just being the world's greatest plumber does not guarantee the success of a plumbing business. While it is important to have a quality product or service to offer, the success behind that brand will rely on an entire array of skills having nothing to do with the art of pipe-fitting. Marketing, promotion, customer service, bookkeeping, accounting, advertising, repeat sales, new sales, tax issues, workers comp, local, state and federal regulations, and figuring out who's going to scrub the toilets - all of these are necessary divisions for any business. As an entrepreneur, you need to ask yourself what you do well, and admit some tasks are better left to others. Even if you choose to run a sole proprietorship, there are ways to outsource many of the tasks listed above, which will free you up to follow your passion, and allow you to do the work you love.
Advice from the Experts
Dave and Linda Brincks, owners of Action Coach Business Coaching in Worthington, ardently agree that a well-written business plan is the single most important factor to the survival of your business. They recommend new start-ups seek out assistance from the SBA, and hook up with experienced professionals who can help your launch succeed. They speak highly of SCORE counselors and business incubators like Tech Columbus.
"I always ask my clients to answer this question: What is it that makes your business unique? Ninety percent of my clients will say, 'Great service,' but that's not good enough," said Linda.
"You need to imagine yourself in a room with your competition and a potential client. You have 30 seconds to make your case. What are you going to bring to the table that they can't provide? What are you going to say that seals the deal and sets you apart?"
Dave went on to explain that many people who take the leap to start their own business are looking to transition from a traditional job or corporate career so they can find a renewed sense of fulfillment.
"They have a strong desire to do what they love, and to gain some control and flexibility over their income and schedule," observed Dave. "Unfortunately, many new business owners find just the opposite occurs. New business owners are often shocked by the amount of work required to get a new project launched and off the ground," he said.
"They need to do more than just deliver the product or service promoted by the business, but they also find themselves having to market it, promote it, handle the sales end, and do all the bookkeeping and accounting as well. It generally takes four to five years before a business hits its stride and runs effectively."
Another common mistake, according to the Brincks, involves insufficient capital, adding that many start-ups are woefully underfunded at launch, and expect a quick return on their investment. It doesn't work that way. A good cushion is needed in the early stages of a business to allow for unforeseen expenses and break the fall when those hiccups occur, the general rule of thumb being one year's operating budget at a minimum.
Show Me the Money
Huntington Bank is the largest SBA lender in Ohio, ranked by the Small Business Administration as the seventh-largest business lender in the country. Huntington.com has an entire section devoted to small business, including a wealth of merchant services, such as do-it-yourself calculators, that help you launch. Other lenders in Franklin County that work with the SBA include Charter One, Commerce National, Commercial Savings, First Bremen, Heartland, Key, Telhio, and The Ohio Valley Bank. Some of these lenders participate in the new SBA Patriot Express Program, which offers small business loans to veterans at the SBA's lowest interest rate and fastest turn-around times. These lenders all have small business loan departments, but if your credit score and business plan do not pass the test at one bank, keep digging. Hit every lender in town. Check with the credit unions, and consider looking for private venture capital through friends and business associates. These resources are scarcer now than in previous years, but if you really believe in your dream, you will eventually find what you need to launch.
Economic Outlook: Is This the Right Time for Risk?
Central Ohio economists Bill LaFayette, Joseph Mandeville, James Newton, and George Mokrzan made the rounds in mid-January, appearing on local talk shows and in forums at The Columbus Athletic Club and The Columbus Chamber of Commerce with their annual Blue Chip forecasts. All agreed that predictions for 2009 were way off due to certain unforeseeable factors, but wanted to send the message that things are starting to inch upward in the coming year.
"The national economy has begun to recover. Virtually every forecast expects this recovery to continue unabated in 2010," said LaFayette.
Chad Moutrey, Chief Economist for the Office of Advocacy at the U.S. Small Business Administration in Washington, D.C., says this is actually a good time for entrepreneurs to break in.
"Many of the big names out there now were started during previous recessions," he said. "The SBA always expects to see an up-tic in business start-ups in this type of climate. Nationwide, we have seen a dramatic increase in SBA guaranteed lending since March of 2009."
He went on to recommend connecting with the local SBA, writing a solid business plan, and shopping for capital.
"We continue to hear about the credit crunch, but there IS money out there," declared Moutrey. "I want to encourage everyone interested in starting or growing a business to take your plan to the bank, and ask for that loan. If one bank turns you down, try another one. Don't give up. If you have a solid idea, one of them will work with you and help you get started."
The Ohio Department of Development paints a quite different picture.
"We are on the ground with these small businesses," said spokesperson Iris Cooper. "We are not talking theory like they do in Washington. The fact is people call me every day saying, 'HELP ME.' They may have needed a 600 credit rating two years ago to qualify for a loan, but today they need better than a 700, and most people can't do that because they have been using their credit cards to keep them afloat during the crisis. We do hope to see some support coming from the Fed in 2010, but the fact is, 2009 was rough."
To Launch, or Not to Launch
Starting your own small business is no easy task. The first few years will mark a long hard road. In order to succeed, you must spend several months planning it out before you even make the final decision on whether to launch.
Once you do take the leap, you won't just own a business; your business will own you. The hours will be long, the stress scorchingly high. You will gain that freedom to be in charge, but pay the price of never being able to leave your work at the office. It will be on your mind day and night, and you alone will carry the weight of making it grow. It's a huge responsibility that requires a wide array of skills, intuition, luck, and tenacity - but most who have tried say it's worth it to be able to look in the mirror on Monday mornings and say, "Hi, Boss!"
Originally Published: February 1, 2010
