By Lance Minnis
I was reading one of the blogs I follow and an article caught my attention: Are Self-Employed People Entrepreneurs or Slackers? The author had attended a networking event and been told by a recruiter that “self-employed people are just people who can’t find work or keep a job anywhere else.”
Now, that kind of talk isn’t calculated to win many friends among entrepreneurs. Having been a self-employed business owner for more than 12 years, and having many customers and friends that are entrepreneurs, business owners, and self-employed persons, I know how … inaccurate … that statement is. But I think it points to a general misunderstanding of what it takes to start your own business, either as an entrepreneur or a self-employed professional.
In this column and the next, I’ll talk about what it takes to start a business, and then what it takes to keep it. Whatever your niche is, be aware going in that you will work harder, longer, and differently, than you ever did working for someone else.
Most people go into business for themselves because they have a particular passion they want to pursue, they see an opportunity to start a business that is underserved in their community, or they feel they are better able to do what they’ve been doing for someone else on their own. While all of these goals are admirable, and typically generate much greater passion for the work, it can lead to a bit of blundering when setting out- after all you can be the best chef in the world, but if you don’t learn about marketing, customer service management, and all the other things you need to know as a small business owner, you could make the best meal in town but there’d be no one to buy it.
So before opening your business, while lining up all the other things necessary, make sure to give some thought to other items for your tool kit. Get a subscription to a magazine like Inc., research and subscribe to small business and marketing blogs, and educate yourself on all the things related to your trade that you will need to know. The Small Business Association and local and regional Chambers of Commerce like the Henry County Chamber and GLI can also be great resources for learning.
You probably will need financing. Arguably, this is the most difficult thing to get to start your own business. It is unfortunate, that even though tons of liquidity exist in the banking system, banks are very reluctant to lend it, especially to start ups and sole proprietors. There are valid reasons, nevertheless it can be frustrating. If you are buying the real estate for your business, you can frequently use that as collateral for a small business loan. Likewise, if you have the money you need, based on your business plan, you can put it on deposit at the bank and receive a loan- the investment hazard then falls on the bank. There are also tax credits of up to 40 percent of renovation cost available for buildings that require work, especially older historic buildings. Most people however, who start a small business or practice rent a space, and don’t have the personal capital required.
There are alternative options: the most common borrowing from family and friends, seeking equity partners or mortgaging personal assets. There are now also Social Networking vehicles called crowd funding. I plan to address it fully in a future article, but suffice to say that crowd funding works by lots of people investing small amounts in your business. It is possible to raise significant amounts of capital this way.
Lastly, and most importantly for the longevity of your business, is people. You must know yourself, and your customer. Spend time researching the demographics of your community, and more importantly, research the type of people you want as your customers. Your marketing and everything else will be driven by those two factors. Next month, we’ll talk about who to hire and making the business work.
Lance Minnis is an Advisor and Financial Coach with Commonwealth Financial Advisors, LLC. He can be reached at (502) 523-2727. Opinions expressed in this column are solely those of Lance Minnis, and do not constitute financial or investment advice.