Starting a business is something that a lot of people dream about, few execute, and of those who do, even fewer find success. If you dream of starting a business, you are not alone. From writing a business plan to forecasting start-up costs, revenues and expenses there is help waiting for you. When you set out to be your own boss, you are the ultimate decision maker. With that, you own all the credit for the successes—and failures—of your efforts. Chances are good that you have expertise in the particular craft or industry of your chosen business venture. However, if this is your first small business rodeo, it is highly likely that you do not have expertise in the craft of successfully running a business. As the chief decision maker for your real or hypothetical small business, it is important to realize your areas of weakness and seek support.
Recognizing the economic importance of small business growth and success, one of the primary sources of free small business support comes from the federal and state government. The U.S. Small Business Administration (SBA) is a federal agency designed to help small businesses with funding, education, counseling, and support. In New York State, the SBA offers a network of New York Small Business Development Centers (NYSBDC) operating in cooperation with State University of New York institutions. There are over 800 SBDC offices around the country, including 23 in New York State.
This month’s Best Practices feature taps North Country SBDC experts Angela Smith and Mark Dame, who share some of their lessons learned both as small business owners themselves and through their work advising small business people locally.
Smith, Dame, and the North Country SBDC team are supported by a research division in Albany that can assist with market research for entrepreneurs and start-ups. Although the main office is in Plattsburgh, the North Country SBDC serves six counties in the region. They are part of a strong network of SBDCs across the state, with over 200 colleagues they can rely on for specialized questions. As SBDC advisors, they have a working knowledge about most aspects of starting and running a business, expertise in some areas, and most importantly, access to the talent of their SBDC colleagues when needed.
Doing Your Homework
According to Dame, many would-be entrepreneurs do not fully research the business or industry they want to get into. Being exposed to work in one aspect of an industry can inspire dreams of business ownership. Beyond experience as an employee, there are cold, hard realities that generally hide behind the scenes and which need to be fully explored before the first steps begin. “It’s difficult to explain to someone who’s never owned a business what it will be like to own a business,” Smith explained. “For example, I might dream of having a bed and breakfast, but I may not understand that the reality of running one is not spending time with guests, so much as scrubbing toilets and cleaning rooms. It is a lot of work, and if you don’t understand what you are getting into, it is easy to burn out.” Most people are optimists when it comes to launching a new business, and that can overshadow the inevitable challenges and pitfalls that will be part of the journey.
A suggested technique for uncovering the realities of business ownership in any chosen industry is to talk with successful owners currently in that industry. This is a tactic that Dame has used himself. “Business owners often take pride in mentoring and sharing their experiences,” he commented. “Most people are decent, and they like to help others. I talked to peers in my industry, some who were even my competitors, and they shared a great deal of information with me, which helped me avoid some of the pitfalls.” Dame added that the guidance of a trusted mentor can be invaluable in this regard.
The Numbers Game
Early in the planning stages of a start-up it is important to do some number crunching to test the viability of the business idea. Business is a numbers game, and business owners need to look at their numbers and understand what they mean if they want to be successful. Dreams can be big, beautiful and bold, but accurate number crunching will paint a more realistic picture up front. Three important sets of numbers to spend time researching include start-up costs, sales and expenses. Dame and Smith acknowledge that it would take a crystal ball to accurately estimate how many customers and what the average sales might be for a start-up, but they still heavily promote a “love your numbers” mantra to help keep on track. “Everybody who starts a business would be successful if they knew what their sales would be up front,” Dame explained, “but no one really knows how many customers will walk through the door. Still, you have to make those estimates, and those estimates should be supported by data.”
The positive and optimistic nature of many budding entrepreneurs often causes them to overestimate income and underestimate expenses. Smith and Dame have found that startup owners commonly underestimate the true costs of running their business. Numbers are particularly important to monitor in the start-up phase, which according to Smith can last about the first 18 months. “It is not an exact timeline, but it takes about six months for planning and getting off the ground,” she said, “then the first 12 months in business you’re still considered a start-up.”
After the start-up phase the numbers still stand front and center for priority attention. As time goes on and things stabilize it can get easier, but it is critical to analyze numbers on a regular basis. Many entrepreneurs are so caught up with running their businesses that they do not think about the numbers until the end of the year when it is time to do their taxes. Smith cautioned against this, and suggested making a weekly appointment with yourself. “If you do your bookkeeping every week you will have fewer receipts piled up, and you will always have a good picture of whether you are trending toward your goals,” she observed.
The Business Plan
One of the stock conversations that happens in small business advising is the importance of writing a business plan. Business plans contain some standard sections that force would be entrepreneurs to drill down and really think about all the aspects of running a business. All too often people start businesses with an abundance of excitement, motivation, and optimism, but without a plan to manage resources, time and money. Smith drew a parallel between business planning and planning for a vacation. “You wouldn’t show up at the airport to go on vacation without luggage, an airplane ticket, or an itinerary,” she advised. “It is important to take your vision and sit down and plan it out.”
Dame and Smith and the SBDC have many years of helping others write business plans. The good news is that writing a plan does not have to take six months and countless hours. Smith advised that this can be done in a way that is “short, sweet, and to the point.” Strong resistance to the business plan concept can be a warning sign that more research is needed. Smith offered a simple structure to help take some of the stress out of the planning. She suggested reading through the main sections of a sample business plan and then spending just five minutes writing notes and responses to any areas that are already known. After doing this, assess how comfortable you are with your level of knowledge and ability to respond. If you are still enthusiastic about your business concept, then proceed to carve out five hours to go back and do some research in order to add to the sections of the plan. Continue this process and check in with your motivation to continue moving forward at each step. “It’s a good little test to affirm how solid you are, and how confident you are with wanting to move forward with your idea,” Smith added. It is not necessary to spend five weeks writing the perfect plan. A thorough step-by-step process can help identify any holes or weaknesses in the plan to make it stronger.
No Cost Small Business Support
The North Country SBDC is an educational, non-profit organization funded in part by the U.S. Small Business Administration, the State of New York, and its host campus, SUNY Plattsburgh. The SBDC staff provides confidential one-on-one business advisement services at no direct cost to the citizens and entrepreneurs of the North Country. Appointments are recommended. For more information about the SBDC, visit www. northcountrysbdc.org.