The U.S. has been in recession for almost two years, according to the National Bureau of Economic Research.
Approximately 6 million Americans have lost their jobs during that period, based on data from the U.S. Department of Labor.
More than a million individuals and 43,000 businesses filed for bankruptcy in 2008, says the American Bankruptcy Institute.
What a great time to start a business!
A recent Wall Street Journal poll found that 69 percent of respondents thought the current economic climate is a good time to start a business. In fact, many successful companies started during previous economic downturns, including the Hyatt hotel chain, Microsoft and Hewlett-Packard. They were helped by the greater availability of talented workers and by suppliers’ and landlords’ willingness to negotiate price discounts, among other hidden benefits.
However, startups need to take extra care to avoid obvious missteps that could kill their ventures before the inevitable economic turnaround kicks in and carries them to the relative security of an established business. Experts and established business owners agree that now is no time to cut corners.
So whether you’re a laid-off corporate worker who recently became an entrepreneur by necessity, a fresh college graduate in the process of launching a successful micro-business, or an early retiree who’s finally pursuing your passion, we’ve gathered some gems of wisdom just for you.
Know Yourself The research should start with yourself, says NASE Member Jason Bringhurst, owner of Professional Cable in Orem, Utah.
“What makes you qualified for this business? Do you have any particular skill or knowledge that will help you be successful? If you like being a carpenter or a salesman, you might not enjoy [business ownership] because you will end up spending most of your time running the business,” Bringhurst explains.
Leila Mozaffari, director of the Orange County Small Business Development Center in Santa Ana, Calif., says that she spends much of her counseling time stepping individuals through such questions about their desire to own and run a business, not merely create a job for themselves.
“We don’t tell them what to do. We ask questions so they can decide if they have a good idea,” she says. “Some people have the passion but not the discipline to run a business. Some have the craft ability, but not the business skills. So the first thing they need to understand is what they bring to the business and compare it with what we have seen in successful entrepreneurs.”
And remember, at every stage of business ownership, you need to nurture your craft as well as the business skills that will make you successful.
Make A Plan Once fledgling business owners decide they can and want to run a company, the most important task should be to write a business plan, says NASE Member Will Wiebe, an executive, life, career and transition coach in Portland, Ore.
“If properly prepared [a business plan] can be an invaluable planning tool as well as a means of measuring your progress toward your business objective,” Wiebe says. “The formulation of a solid business plan needs to be viewed as an integral part of any business startup.”
Doing all the research necessary to write a useful plan could take months, but it is well worth the time and effort in the long run, Wiebe adds.
Bringhurst of Professional Cable agrees that many novice business owners “haven’t actually thought through the process of how this business will come together and what it will take to make a living. I had a business plan; not for other people, not for investors, but just for myself so I could think through everything.”
Professional Cable manufactures and supplies computer, network, fiber optic and home theater cables to several different industries nationwide. It is Bringhurst’s second business startup.
“Before opening my doors in 2007, I already had talked with many of my potential customers,” Bringhurst says. “I had already talked with my main suppliers and made them aware that I was going to start another business. But even with so much in place, it still took six months before I could start paying myself a paycheck.”
Keep in mind that business plans aren’t just necessary for startups. Whether you’ve been in business for a few weeks, a few months or even a few years, it’s never too late to craft or revise your business plan.
Find Capital Finding money to fund the startup, growth and expansion of a micro-business is an ongoing necessity for owners. But it’s a particularly critical task for businesses just getting off the ground.
Many experts recommend that a new business owner have enough money on hand to survive at least a year without drawing a paycheck.
Bruce Schoenegge, a member of SCORE, a nationwide group of volunteer business counselors sponsored by the U.S. Small Business Administration, says, “Startups need more resources than they initially think to survive.”
Bringhurst agrees.
“There are so many costs to starting a business, from computers to furniture to warehouse equipment to product to stock.”
New micro-business owners must realize that the most likely source of capital to start their ventures will be their own wallets. Even when the economy was booming, many banks wouldn’t make loans to businesses that were less than 3 years old. Now that the housing industry collapse has put so many lenders in financial difficulty, they’re even less willing to make business loans.
During the housing boom, many entrepreneurs took money out of their homes to finance a business startup. But the housing collapse has dried up that source of capital, too.
Equity investing through venture capitalists and private equity funds has also declined in the past several years.
So startups must depend on savings and on money they can raise from family and friends to launch their micro-businesses. They may not be able to raise as much capital as they could in good economic times. And that means they must show discipline in how they spend the money,
Schoenegge adds.
Some questions to ask about money: ■ Can this business be run from home? More than half of startups now begin in a garage or spare bedroom. If customers don’t have to come to your location, a home-based business can thrive while saving thousands of dollars in monthly rent. ■ Are there used office furniture stores and thrift stores in your community with desks, chairs, file cabinets and lamps to get your business started? ■ How much work can you do yourself, from building a Web site using simple inexpensive programs to setting up your financials on QuickBooks?
Choose Your Business Carefully The choice of business to start is important, but in ways that many people who have never owned a company might fail to consider.
Sure, these days you wouldn’t start a buggy whip manufacturing plant. But what about a variety store that attempts to sell something to everyone or a consulting practice that tries to solve every problem? Could those types of companies succeed today? Probably not.
“Small-business people need to specialize in order to succeed,” emphasizes Robin Noah, another SCORE member. “They think they can be all things to all people, but they can’t. They don’t have enough resources or experience.”
The good news is that in a recession, “there are plenty of niche holes that are not being filled because the current players are cutting back and don’t have the capital to take advantage of those gaps,” says Noelle Nitz, a business consultant in Orange County California.
Her own niche is serving as a chief financial officer for smaller companies that cannot afford a full-time employee.
Many would-be micro-business owners stumble because they don’t know how to identify a void in the market that is big enough and profitable enough for a new business.
Bringhurst recommends asking yourself a series of questions about a potential business before committing to starting it. Among the questions: ■ What is the demand for what you want to do or sell? ■ Why will people buy from you instead of your competitors? ■ Are there already 10 of the same type of business in your market? ■ If so, will you be able to offer something unique: price, service, product, quality or location?
Answering these kinds of questions shouldn’t stop once you’ve started up your business. Identifying and filling niche markets is an ongoing process that successful owners pay attention to throughout the life of their companies.
Identify Your Target Customer Those questions help identify a niche on the supply side of a business. The other half of the niche equation identifies the demand side—the target customer.
Many new micro-business owners try to provide everything to everyone. They’re afraid to say no to a potential client for fear they might not make enough money on which to live.
But business owners don’t have enough time, energy or marketing budget to reach every possible buyer. So rather than trying to satisfy every potential customer, owners are better off capturing the lion’s share of a narrowly targeted group of customers.
Of course, that target group can change over time. To compete for the long haul, business owners must keep their fingers on the pulse of customers and cater to their needs.
Tap Resources Fortunately today’s new micro-business owner can find valuable resources to help identify customers, access financing and answer every conceivable business question.
The NASE is a great place to find resources—for startup entrepreneurs as well as long-time business owners. Members save money with discounts on products and services. Consultants are available to answer your specific business questions. And the NASE even gives members access to capital through the NASE Business Development Grant program. You can explore all of the resources at www.NASE.org.
The Internet is a top-notch resource, too. Many communities and colleges have a Small-Business Development Center (SBDC), SCORE chapters, workshops, classes and books to answer most questions about starting a business.
And many existing business owners are willing to help newcomers avoid the mistakes they made in their startup years.
NASE Member Wiebe says, “I had never worked for myself prior to 2004. I integrated a tremendous amount of research, networking and asking questions, questions, questions all related not only to the professional aspect of my coaching business, but the basics of how to start my own business.
“I was very fortunate. For every person I had a conversation with, they were able and willing to share their experiences, challenges, what worked and what didn’t work,” says Wiebe.
As NASE Members know, navigating the waters of launching a new enterprise can be tricky. Issues range from the importance of an ethical foundation to the need to continually network.
Every owner makes mistakes when planning, starting and growing a new business. The difference between those who succeed and those who eventually close their doors is the ability to correct mistakes, to adjust and to move forward through tough times. The inflexible do not survive.
Finally, Wiebe recommends asking an established business owner to mentor you through the startup years or hire a business coach. He did and says, “It made all the difference in the world in terms of my professional and personal support.”
Jan Norman has interviewed thousands of business owners about their startup adventures and is author of “What No One Ever Tells You About Starting Your Own Business” (Kaplan Business, 2004). Read her blog at http://ocregister.com/jan.
Taken from: Words Of Wisdom, Self-Employed Magazine, September/October 2009
http://www.nase.org/knowledgecenter/selfemployed/selfemployedcurrent/09-08-31/Words_Of_Wisdom.aspx
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