Use Business Sense at the Start and Dollars Will Follow
BY RUSS GIFFORD, REAP SASBA CHAIRPERSON AND CENTER FOR RURAL AFFAIRS COMMUNICATIONS DIRECTOR
Statistics show small businesses are the economic generator for local income. Frequently, that means starting your own business. But the key is using business sense
before you make the leap into your own business.
It’s all about the cash. Point one on your ‘important things to know’ list: You can lose money for years and still have a company. But when you are out of cash, you are out of business – period. So realize that creating a great product or service is vitally important, but getting the cash into the bank has to be your focus, or you won’t be around long.
To that end, here are things you need to know, or do, before you open your door on Main Street or the Internet.
Understand how profit and loss works. The facts on this point are stark: a recent study found 70 percent of business successes had taken a course in accounting basics and 90 percent of failures had not. Don’t handicap yourself before you get started!
Make a financial plan. This is also known as a business plan. Don’t shudder. This is the most important pre-launch time you can spend if you want your business to be a success. Your business plan is your road map to success, and the method to avoid the dangerous dead ends that eat time and money. Done correctly, it will force you to look at reality.
Simple questions lead you to dig for important answers. Who needs my product?
How often will they need to buy it and how much will it cost to purchase the raw materials or to provide the service?
Where are my customers located? What will it cost to reach them?
These questions will help you plan for success, since it will also help anticipate needs and avoid surprises.
Planning means access to help. Your business may take time to grow into profit, yet perhaps you have upfront costs for equipment or inventory. Loans and investment money are the way you bridge the gap in money, but banks and investors like to know that you know what you are doing.
But they only loan money to people that have proven they will try to use it wisely. Your business plan tells them you have given the matter serious thought. It is also vital information before you can ever borrow money from a bank, small business lending association, or qualify for economic development funding.
More importantly, it is another key to avoid failure. Again, businesses that don’t start with a business plan are the most likely to fail.
Many organizations and institutions are available to help you with this, including local economic development operations, some community colleges, and Small Business Association (SBA) lenders. In Nebraska, REAP sponsors classes on how to write a business plan.
Maintain your personal balance. Too often, only the checkbook balance figures into your business plan. Starting your own business will require your time and your money – and lots more of both than you think.
Be upfront with your family and yourself, and recognize that you need to maintain the balance between work, self, and family to achieve real success. Otherwise, overwork and burnout cause you to lose everything. Remember to enjoy the journey as much as the result!