By Jodie Jacobs
Whether you’re tired of office politics, a victim of downsizing or have a passion for something other than what you’re doing, you may think you’re ready to leap into the world of entrepreneurship. But how can you prepare to be successful in a difficult economy?
When asked if people are crazy to take that leap given current economic conditions, Marianne O’Brien Markowitz, regional administrator at the U.S. Small Business Administration, answered with an emphatic “No.”
“They’re not crazy. Historically, recessions have produced the strongest businesses,” Markowitz said.
Your chances of success relate to how prepared you really are, financial experts said.
“You don’t know what you don’t know,” said Jan Bauer, director of the Illinois Small Business Development Center (SBDC) at the College of Lake County. SBDCs provide free counseling for startups and classes on steps to take before launching a business. The class offered at Bauer’s center can be taken online by anyone in Illinois. Counselors also are available by appointment at SBDCs. For a list of SBDCs, see the resource section of SmallBusinessExecutive.
Before launching your business, Markowitz recommended taking two assessments: personal and business. Then consider whether your business and personal goals are well aligned. Going into business means a lifestyle change. Consider how it will impact your life and whether it’s practical..
Create a business plan to learn what’s feasible. Create a budget that shows how much money will be required. You’ll quickly see whether the concept can work.
“A lot of businesses wait until it’s too late to get counseling. Seek assistance in the beginning so you have an idea of what to expect,” Markowitz said. “Once you have a business plan, take it to the counselors. Let them poke holes in it.” The process of creating a business plan will help business owners understand what they are getting into, she said.
Be realistic in your projections, Markowitz added, and don’t expect to be profitable in the first six months of business.
Materials from the U.S. Small Business Administration and SBDCs show entrepreneurs that cost and profit projections are only part of the equation. Also consider pricing, marketing, production, delivery, staffing, location, competition and compliance with local, state and federal regulations.
Where to Find Funding
Banks assess an entrepreneur’s experience and business plan to determine credit worthiness, according to Markowitz.
“Getting a bank loan is greatly increased if you have a strong business plan,” she said.
“The SBA website (www.sba.gov) lists resources and active lenders,” Markowitz said. She added that conventional lending is recovering and that the SBA is also handing out loans.
“We’re hitting record lending levels,” Markowitz said.
By working with an SBDC, entrepreneurs gain access to local bankers and community resources, Bauer said. “We want people to succeed. People get into a business because it’s their passion,” she said.
SBDCs also offer up-to-date information on federal and state economic assistance programs such as loans, tax initiatives and staff-training dollars. For example, the SBDC at the College of Lake County recently noted on its website the availability of SBA express loans as well as microloans from Chicago-based ACCION. “You don’t have to go it alone,” Bauer said.
The Advantages of Franchising
Instead of starting from scratch, some people look at franchise opportunities.
When Elaine Krieger, president of Naperville–based Krieger Kiddie Corp., was let go after nine years of heading a marketing department because the company downsized, she was devastated.
Walking through a mall, she came upon a resale shop where she saw a Gap dress for $3 that she had purchased for her daughter a few weeks prior for $25. She realized here was something that could work in bad economic times, considering a resale franchise as a career move.
Krieger went to SCORE for advice, developed a business plan and looked for financing. After five banks turned her down, a sixth bank agreed to a loan.
“It’s about not giving up. If I hadn’t gone to that sixth bank, I wouldn’t be where I am today. Her corporation includes Clothes Mentor, Plato’s Closet and Once Upon A Child retail apparel resale stores.
Although some people want to escape from big business, her comfort level was to be part of an existing operation. She recommends anyone interested in a franchise should visit Franchise Finder on the web.
“The corporate world and small business world are like night and day. I like being part of a big team, but still on my own,” said Krieger, who has 12 Chicago-area locations and is projecting sales of more than $10 million in 2011. Krieger said, “I can’t imagine life any differently now. I feel truly blessed.” Read more about Krieger on SmallBusinessExecutive.
For more information, see the resources section of SmallBusinessExecutive.