When asked if people are crazy to take that leap given current economic conditions, Marianne O’Brien Markowitz, Regional Administrator U.S. Small Business Administration, answered with an emphatic “No.” “They’re not crazy. Historically, recessions have produced the strongest businesses,” said Markowitz.
Instead, financial experts say your chances of success relate to how prepared you really are.
“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 are among three primary resource operations that provide free counseling services for start-ups. The other two are SCORE and the Women’s Business Development Center.
In Illinois, SBDCs are also connected to the state’s Department of Commerce and Economic Opportunity. There 36 centers throughout Illinois, most tied to local education institutions, but some are associated with not-for-profit help operations such as the Duman Microenterprise Center at the Jewish Vocational Service in Chicago.
SBDCs offer classes on the initial steps to take and questions you need to consider. The class offered at Bauer’s center can be taken on line by anyone in Illinois. Counselors are also available by appointment at each SBDC.
Markowitz and Bauer recommend you work with business experts as well as authorities in that field.
Markowitz recommended two assessments: personal and business.
• Are your business and personal goals 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. Budget it out. See how much money it will take. You’ll quickly see if the concept can work.
“At the SBA, we have the three C’s: Capital, Contracts and Counselors,” she said. “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. Once you have a business plan, take it to the counselors. Let them poke holes in it. Through this process, you’ll learn what you’re getting into,” Markowitz said.
She added, “Don’t expect to be profitable in the first six months. It’s important to nail projections. Consider what’s most realistic.”
SBA and SBDC materials show entrepreneurs that cost and profit projections are only a part of the equation. Also consider pricing, marketing, production, delivery, staffing, location, competition and compliance, if applicable 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.
According to Bauer, one advantage of using an SBDC to work through the start-up process, including finding a loan, is that each site has ties to local bankers and community resources.
“We want people to succeed. People get into a business because it’s their passion,” she said. “They’re not necessarily experts in all aspects of it such as taxes, HR or marketing. Recently we p
ulled together a meeting with an SBDC client, a banker, the village and Lake County Partners. When it was over the banker said, ‘This was wonderful. I’d like to do this again.’”
Another advantage is that SBDCs have up-to-date information on federal and state economic assistance programs such as loans, tax initiatives and staff-training dollars.
As an example, a recent note on SBDC’s College of Lake County site noted that SBA Express Loans were available and that the center had access to small business microloans in cooperation with Accion Chicago. Another note warned against paying a fee to a company or person to provide small business start-up grant information because SBA and SBDC information is free.
“Last year, we worked with 500 different businesses,” Bauer said about her Lake County site. “You don’t have to go it alone.”
Combine product passion with expert advice
At age 29, Chicagoan Jacob Elster was named SBA’s Young Entrepreneur of the Year in Chicago, along with business partner Taylor Mork, New York. After working at a non-profit operation in Uganda where they saw the importance of connecting coffee farmers with ethical outlets, the two friends co-founded Crop to Cup in 2007. Elster estimates the company is valued at between $1 and $2 million.
He is passionate when he talks about connecting coffee farmers with specialty coffee roasters, distributors and retailers, but he acknowledges he knew more about coffee origins than business. “I majored in anthropology,” he said.
To turn his dream into reality, Elster developed relationships with people in coffee industry associations and sought financial and legal advice from experts.
“I call them the “gray hairs,” he said. He obtained free advice from several resources, including the Duman Microenterprise Center.
“You know what you like to do as well as what you don’t. You have to build a team,” Elster said. “It’s very important to be open to input.”
The Advantages of Franchising
Instead of starting from scratch, some people look at franchise opportunities.
When Elaine Krieger, president of Naperville–based Krieger Kiddie Corporation, 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.” Krieger has 12 Chicago area locations with projected sales to exceed $10 million in 2011. She recently received an SBA Entrepreneurial Success Award.
Krieger said, “I can’t imagine life any differently now. I feel truly blessed.”
Small Business Administration www.sba.gov
DCEO's Office of Business Development
SBDC at College of Lake County http://wpdi.clcillinois.edu/sbdc/
Duman Microenterprise Center at the Jewish Vocational Service, Chicago http://www.jvschicago.org/duman/.
Women's Business Development Center http://www.wbdc.org/