Expert Stephen Windhaus offers suggestions on how
to make your business better, in good times and bad.
Here are 10 considerations to keep in mind to help
your business thrive year in and year out:
1. Spend smart: Regular
readers know my basic philosophy is that you should never spend
money on anything that's not a sure moneymaker. If you cannot
be certain an expenditure will produce enough sales to cover its
cost and achieve a profit margin, then don't spend it. After all,
you are in business to make money.
2. Create a business plan:
Yes, I write business plans for a living, but every client who
walked away with one of our documents was convinced this is the
best tool by which to begin a business. Running your own company
is one of the biggest financial moves you'll ever make. You need
a good business
map to survive the journey.
3. Assemble a marketing plan:
If you simply don't want to research, develop and write a business
plan, then you must at least put together a marketing plan. Do
detailed research in the specific market using the classic marketing
mix of product, people, place and price. Always keep in mind
the strengths and weaknesses of the competition. Know the kind
of market you are getting into. And remember when economic shakeups
occur, some products and services are simply not as attractive
as they were in previous years.
4. Take advantage of free
advice: I cannot overemphasize that there is a lot of free,
confidential advice available to small-business owners. Government
subsidized programs, such as Small
Business Development Centers, SCORE,
Minority
Business Development Centers, Native
American Business Development Centers and Women's
Business Centers, are found throughout the United States.
Visit them, and let their expert counselors help with the specifics
of running your business.
5. Understand that there is
no free money: It seems as money gets tighter so does the
desire to find those ever-elusive grants for starting a business.
But there are simply no federal grants that issue "free"
money to start a business, especially to meet operating overhead
or purchase fixed assets. The University of Wisconsin at Green
Bay has a Web
page that elaborates on this issue. Additionally, the site
provides hyperlinks to 50 genuine grants for small business. There
are, however, reimbursement programs for hiring new employees,
as well as local grant programs. These are explained in my column
"Yes
there are free grants, but none of them are free lunches."
6. Prepare for your banker.
Even when interest rates drop, business loans aren't necessarily
easier to obtain. In fact, during periods of economic decline
and recession, commercial lenders look even closer at any loan
application. As I have noted several times in the past, commercial
lenders, for the greatest part, do not lend to startups. They
simply consider the risk too great. That doesn't mean getting
a loan is impossible; it just takes a bit more work on your part.
This Bankrate.com story details a five-step
business loan preparation plan that should help.
7. Explore venture capital:
I am pleased with one by-product of the dot-com crash.
Venture
capitalists are now taking a more serious look at business
plans, and expect more substance supporting projected profits
within the first year or two. They also are now very skittish
about doling out money so liberally. This means that you need
to know what VCs are considering as prime targets for today's
investments. For the most part, Internet and e-commerce proposals
are more heavily scrutinized, while more traditional proposals
are regaining popularity. By the way, you will have to follow
tip No. 2 (writing a business plan), when approaching venture
capitalists. Without a business plan, you'll get no consideration.
The same holds true for commercial lenders.
8. Pay your self-employment
taxes: If you do decide to start that business, conduct
a thorough tour of the Internal
Revenue Service Web site, particularly the special section
devoted to small
business. Know the tax laws and become familiar with all your
federal tax requirements. One particular area to pay attention
to is self-employment
taxes. When you worked for someone else, the Social Security
and Medicare contribution was shared with your employer. Now that
you're self-employed, you must pay both portions of the total
contribution. Many startups ignore this until it's too late, so
be certain to put aside the appropriate portion and make those
quarterly payments from the outset. Otherwise, you could face
a significant tax payment come April.
9. Be sure buying is the right
move: Do you think borrowing will be easier because you
decide to buy an existing business? Think again. As noted earlier,
commercial lenders are clamping down on all lending. However,
should you proceed with buying an already-operating company, you
need to be as demanding as a banker. Do your homework and request
the information a lender would expect, so you can properly evaluate
the sale price and solvency of the venture.
10. Make the tough entrepreneurial
decisions: Businesses will face constantly changing economic
conditions. Sometimes the economy will help your company. Too
often, your business will be hurt by factors beyond your control.
That means your entrepreneurship abilities will be continually
tested, frequently forcing you to face mixed signals that will
require you to make decisions based on apparently conflicting
data. In some cases, that means delaying action. But, as unsettling
as it may be, in others you can't afford to hold back or you could
miss out on business opportunities. For example, even as the economy
slowed in the last quarter of 2001, companies that went ahead
with patriotically themed products have seen good results. Keep
your eyes open, do your homework and have operational contingencies
for your new company.
I wish all of you well.
-- Updated: Dec. 5, 2002
