Considering a Small Business?/Ask Good Questions and Plan Well
by Kathie Dickenson
Thinking you might want to start a business? Perhaps you like the idea of being your own boss, setting your own hours and working in your pajamas, or someone has told you you’re such a great cook you should start a catering business. Maybe you’re seriously insecure or unhappy about your job and wondering whether you could take your skills and successfully go out on your own.
“Successfully” is the key word. David Shanks, director of the New River Valley Small Business Development Center at Radford University, has a “three-finger feasibility test” to determine whether pursuing a small business could be right for you:
1. Do you have the technical expertise and knowledge needed to do what you want to do? It’s not enough to be able to cook. Do you have nutritional training and an understanding of safe food transportation?
2. Have you had small business management or ownership experience? This is quite different from working for someone else, says Shanks. Besides doing the work of your business, you’ll need to take care of accounting, marketing and selling. If you’re in retail you’ll need to know what to buy, where to buy it and how to market it. Unless you’re a one-man show you’ll need to be able to manage people - that means paying them, seeing that work gets done and making sure you, too, get paid.
3. Do you have the money you need - or some money? Shanks says grants are almost non-existent for small business start-ups, and neither banks nor the government will ante up 100 percent financing for first-time entrepreneurs. “You’ll see advertisements for books and seminars that promise to show you how to get ‘free money’ from grants and government programs,” Shanks warns. “These books and seminars are expensive, and they don’t deliver. The reality is that to start a business you need money.” How much money? “More than you think,” says Shanks.
Sound discouraging? Shanks wants people to know what it takes to start a small business so that if they do try, they’ll succeed. He recently counseled a man who wanted to start a restaurant. When he applied the three-finger test, he discovered the man liked to cook and his friends liked to eat his food, but he had never worked in a restaurant - so he had no technical expertise. He had never managed or owned a business. He had no available cash. “That’s a formula for failure,” says Shanks.
The good news is, “People are starting small businesses every day successfully, and there are more opportunities than ever before,” says Shanks. “That doesn’t mean everybody should try it. It takes real dedication. Some people work two jobs until a business gets on its feet.”
If you pass the feasibility test and are determined to try, where do you go from there? Again, Shanks offers pointers.
1. Assess your skills, strengths and weaknesses and those of the people you want to join you.
3. Determine the feasibility of the business from a financial standpoint.
In going through these steps, says Shanks, seek help from experts. Resources can include Small Business Development Centers and organizations like SCORE - Senior Core of Retired Executives - that offer consultations and seminars at little or no cost. Many community colleges and universities offer noncredit courses in which you can educate yourself on business planning. Some micro-loan programs offer courses in how to start a business. A variety of organizations offer a program called The Nx Level for special needs groups - Shanks recently taught one for prison parolees.
The two biggest reasons for business failure, says Shanks, are lack of planning and lack of money. When you go to a bank or apply for a government loan, you’ll need to present ample evidence of planning, he says. Before applying you should work out a business plan that includes:
* Your vision - what do you want to do and where do you want to go with it?
* Your products or services and how you will price them.
* Your marketing plan - who are the customers? What are their characteristics and spending habits? How many are in your demographic area? How do you plan to reach them?
* Why you can do this - do you have the expertise, or who will you bring on board to provide it?
* Your operations plan - facilities, equipment, labor, day-to-day operations.
* Numbers - a detailed, month-by-month expense and income projection. What will you use your money for? Where will you get it?
If the right elements are present, starting a small business can turn a bad situation around, says Shanks. He is part of an emergency response team that counsels employees facing layoffs. Shanks himself started three businesses from scratch during the heart of recessions in 1972, 1981 and 1989, once when he was unemployed. It can work, he says, if you are realistic about your goals and capabilities, educate yourself, plan well and work hard.