The Smart Start Up Guide.
by Annie Finnigan, Reprinted with permission by Woman’s Day.
You have a great idea and you’re ready to dive in. But before you take the plunge, follow four steps that will save you time, money and a lot of heartache.
- Imagine It
Figure out if this is really what you want to do.
“You don’t have to have a passion for your particular product or service,” says real estate guru and star of ABC’s Shark Tank Barbara Corcoran. “But you must be excited about making your business a success, which gives you the stamina you need to get through the ups and downs.”
Is the business a good fit with your life? To find out, try the U.S. Small Business Administration’s Starting Up Assessment Tool, which evaluates your skills, personal traits and experience.
- Research It
To determine if your idea is a winner, you need to know if it fills a need, and if there is a market for it. You also need business sense. So talk to everybody. “Don’t be afraid to discuss your idea for fear that someone will steal it,” says Patricia Greene, PhD, professor of entrepreneurship at Babson College in Wellesley, Massachusetts. “That prevents you from getting the help you need.”
The Small Business Administration is your one-stop shop for free online business-planning and strategy courses, as well as affordable in-person counseling. “We can help with market research, planning and bank loan preparation,” says Ana Harvey, assistant administrator of the SBA’s Office of Women’s Business Ownership. You can also find a business mentor through SCORE, a nonprofit whose 13,000 expert volunteers offer counseling.
Local organizations like chambers of commerce, community colleges and trade associations offer low- or no-cost classes and workshops to help you with nuts-and-bolts issues like assessing the viability of your idea, developing a prototype and more. To connect with these resources in your town, contact your Chamber of Commerce’s small business department. Another resource: WomanOwned.com, which provides startup information and networking assistance.
- Plan It
Next up: writing your business plan.
Most business plans include your objectives, a description of the business, a market analysis, an analysis of startup and day-to-day costs, a marketing and sales strategy, and an organizational plan. The SBA’s online “Writing a Business Plan” pages walk you through the process. Another resource: the National Association of Women Business Owners, which assists female entrepreneurs with long-term planning (go to NAWBO.org to find a local chapter).
Many women make the mistake of not factoring in pay for their time and effort, notes Harvey. Your salary should be part of your plan’s costs. If you’re not sure how much to pay yourself, go to the Bureau of Labor Statistics’ Occupational Outlook Handbookand search for wages by industry as a starting point.
- Finance It
“Doing financial projections isn’t that different from planning for your kids’ college fund,” says Amy Millman, founder of Springboard Enterprises, a nonprofit that helps female entrepreneurs raise venture capital.
The startup phase: First, nail down the cost to launch and run your company. Then decide where you’ll secure the funds to get going. Many people use their own cash and credit, or get help from family and friends, says Dr. Greene. As for venture capital, just 3% of small businesses rely on it, and only 5% of recipients are women. The truth is, not all firms are well-suited for it, especially in the startup phase, says Millman. That’s because investors expect a major return (say, 10 times their investment) and a quick turnaround of five to seven years—something most small businesses can’t manage.
You’ll also need to do a break-even analysis (a projection of when revenues will outpace expenses and you’ll make money) and learn to write financial statements, which pinpoint your company’s value. Find how-tos on the SBA’s “Preparing Your Finances” page. For more financial tips, check out Springboard Enterprise’s Learning Center Virtual Bootcamp and Wells Fargo Business Insight Resource Center.
The long term: Think about where to get money when you want to grow or if you have a shortfall. “To get a bank loan without collateral, you usually need three years of revenue,” says Millman. The SBA can help you find a bank that lends to small businesses or access microloans, which have less-daunting requirements than banks. Now may be the time to also turn to venture capital firms like Fund Isabellaand angel networks like Golden Seeds, which invest in women-owned companies.
Listen to our interview with Woman’s Day Editor-in-Chief, Elizabeth Mayhew.