A Beginner's Guide for Preparing to Finance a Small Business Start-up
(@ 2001 by Dr. Yanina Shapiro)
As of November 25, 2001, the search string "starting small business" has
produced, at www.google.com, 1,850 entries
within 0.11 seconds. There clearly is no shortage of either experts on or information
about how to start a small business. Yet, at all sorts of internet forums and expert
business sites, people continuously ask just where they should begin and how they should
proceed with starting a business. What aspiring small business owners appear to be
searching for is a basic guide for getting from a point of business conception to the
point of financing that business. A Beginner's Guide for Preparing to Finance a Small
Business Start-up is the Corporate Psychology & Mental Fitness, LLC response to that
need.
The guide is written by Dr. Yanina Shapiro, whose first entrepreneurial ventures could
have greatly benefited from some such guide, and from the services for beginning
entrepreneurs that are currently offered by Corporate Psychology & Mental Fitness,
LLC. The guide topics, which include an argument Against Traditional Advice on How to
Start Your Own Business, A Ten Step Guide for Getting Ready to Finance Your Small
Business, and Useful Links and Resources, and the company services are listed as links
below.
A Case Against Traditional Advice on
How to Start Your Own Business.
Why Begin with Establishing Your Business Identity?
A Ten Step Guide for Getting Ready to Finance Your Small
Business.
Useful Links and Resources.
Help us raise money for the Internet Psychology
research Institute!
A Case Against Traditional Advice on How to Start Your Own
Business
Unless your business idea is a mere passing thought "would not it be nice
...." , you surely have considered how your business will make money or become a good
non-profit. Most likely, your idea is not about duplicating a business that already exists
and you have seriously thought about your competition and about surviving and prospering.
Although it has yet to be written, your business plan has long been conceived and your
business is very much alive, if only in your own head. What you wonder about is how to
finance your business and whether you are a sort of person who can pull it off. Where do
you begin? At your bank? At a closest SBA office? At a nearest business development
center? According to the traditional advice on how to begin your own business, you begin
at either or all of those organizations, where you will be given a lot of printed
information and pointed to a number of web sites.
Access
Your PC from Anywhere - Free Download
Suppose you begin @ www.sba.gov, the
excellent site of the Small Business Administration, to which the aspiring business owner
is most often referred. There, you will find a lot of very detailed information about the
legalities of different business entities ( sole proprietorship, partnership, for profit
or non-for-profit corporation, s-corporation, limited liability corporation, et), the
essentials of a good business plan, and a variety of options for financing your business.
To a beginner, the abundance of all that informational detail may seem both overwhelming
and intimidating. As if in answer to your question "How do I get to a closest
McDonald's?", you were told, at length, of the dangers of driving in a snow storm and
the types of snow tires available for all sorts of vehicles. This is more or less what
actually happens when your advisors are the SBA or bank officers. You may think of
yourself as an entrepreneur, but they think of you as a safe or not so safe loan prospect
(the not so safe prospect has no collateral to offer). For them, the life of your business
does not begin until it has been financed. Like all other bureaucrats, they have a
tendency endlessly to plan every single detail before ever beginning to DO anything. .
Taking risks is not what their jobs are about. Nor are their jobs about doing things fast.
Because, according to the traditional advice on how to start a small business, your
business does not exist until and unless it has been financed, you are advised to begin
not with a big picture, but with small details. Instead of first establishing your
business identity and forming a good management team, you are advised to begin with
researching your competition, investigating the sort of tax advantages and disadvantages
to be had from forming a corporation as opposed to other options, and then writing your
business plan. Need help? There are scores of the SCORE/SBA volunteers and business
development advisors. In due course, they will help you write a business plan they find
acceptable. All this will take time, a long time time, like a few months. But once your
business plan is approved by those small business advisors, you are ready to apply for a
loan, which, if you so wish, may be guaranteed by the SBA. All that the SBA needs to
qualify you for a government guaranteed un-secured loan is to know that you have the
strength of character to endure the starting and running of your own business. How do they
know? Well, they will look at your resume and decide.
What the traditional school of thought never tells you, however, is that the people on
whose wise advice you are going to rely are not likely to have any experience in starting
a business of their own. Nor to know ANYTHING about how to run a business. How could they?
If either government or bank employees were entrepreneurs, they would not have become
either government or bank employees (and many a volunteer who work for SCORE/SBA are
former government employees.). Nor will they tell you that the SBA loans will be very,
very small, which is what so likely to abort your business prematurely. Yes, they do
understand that to make money, a business needs a marketing and advertising budget. But
no, the SBA and their guaranteed lenders will not give you a loan big enough to absorb
such budget. They will not take risks. It is only AFTER your business will have made
money, they will offer a bigger loan. Nor will they tell you that the SBA guaranteed loans
will have very high loan originating fees and interest rates. The SBA itself will make no
money on your loan, but it will let the SBA approved lenders charge higher interest rates
and pass on to you all the expenses associated with processing your loan. Some such
lenders, a garden variety of community banks, manage to do both - receive grants from the
government and charge much higher interest rates than commercial banks do.
Come to think of it, the whole idea that the government, a huge and not very efficient
bureaucracy, is qualified to teach anybody how to start and operate a business is totally
preposterous. What the government could do is to simplify the process of obtaining
government guaranteed small business loans and to provide clear guidance on how to obtain
such loans . But the government is not anywhere close to making either the process or the
guidance simple and clear. Instead, the SBA initiated a staggering variety of loan
programs - for women, minorities, veterans, etc. Those programs require more and more SBA
employees, who know less and less about the specifics of all those programs. Moreover, the
growth and expansion of the SBA is taking the money away from the small businesses the SBA
is supposed to be helping.
In so far as the psychology of business is concerned, the traditional school of thought
on how to start a small business has got it totally wrong, on more than one account.
Firstly whereas the SBA special programs appear to assume that the business as such is
affected by whether its owner is a woman or a minority or a veteran, it is not the owner
but the consumer demand and the market forces that drive the business. Making the business
owner's race, religion, age, and gender central to his/her business is simply not a good
business practice. Nor is the assumption that the general business or other information
should be gender or race or religion specific.
For all such reasons, a small business owner is well advised not to rely on the
information provided for special groups such as women business owners or black or blue or
pink business owners. Business is business and entrepreneurs are entrepreneurs. Our
schools and colleges are co-educational, for all Americans. Why should there be special
business education and/or web sites for women business owners or for black business
owners? Why should their businesses require special financing? The sooner the well-wisher
stop their segregation, the better they will serve to the cause of advancement of all
groups of population. The segregation of information and financing may produce more
opportunities, but it does not produce better opportunities. Look at the quality of
business information produced for women! They are treated as if their gender was a cause
of mental retardation an/or total in-comprehension of business matters.
Secondly, the notion that a bank or the SBA or both, will figure out whether you have
the strength of character and determination to endure the test of entrepreneurship and
whether you possess the qualities demanded by your particular sort of business is just
false. Two sorts of people are best suited to help you figure out whether you are an
entrepreneur - the psychologist cum business coach and the entrepreneur. All you need at
this stage is an hour or two of consolation with a psychologist and/or business coach, but
try to talk to as many entrepreneurs, both successful and not so successful, as you
possibly can. While looking for a psychologist and/or business coach, make sure that s/he
has the right credentials. Check out on the person's training and his/her familiarity with
business or corporate psychology and the issues of entrepreneurship. Ask them for
references. And remember to request a free 30 minute consultation, which is customarily
provided by most professionals. If you are interested in our services, please write to coaching@startingbusiness.org
Thirdly, quite unlike the SBA or bank employees, entrepreneurs do not wait for the SBA
or a bank, or anybody else, to tell them that their business idea is good enough to be
financed. The entrepreneur first forms his/her business, and then pursues the best
available options for financing it. In so far as the first business expenses are
concerned, the entrepreneur will not hesitate to use a business credit card. It is the
nature of an entrepreneur to take calculated risks. In forming his/her business, the
entrepreneur thinks not only of the product and/or service the business will produce, but
of a team of highly qualified people needed to make that business a success. That team,
surely will include the financial, marketing, business, technical , and HR experts, if
only as consultants. Their business plan will be a collaborative effort, wherein a
financial expert makes financial projections, a marketing experts makes sales and
marketing projections, and so on. The entrepreneur and his/her team will seek the shared
experience of other entrepreneurs.
^Top of page
Why Begin with Establishing Your Business Identity?
Even if you are going to be your business sole proprietor, you need to create a
business identity which is separate from your own and which has a bank account that is
separate from you own. Sure, there is a big part of you that is invested in your business.
However, it is not you, but your business that banks and investors may finance.
To realize a psychological impact that an established business identity will have on a
prospective lender or investor, compare two situations pertaining to a job search. In the
situation
- you stumble into a prospective employer's office and ask if they have a job for you. You
have no resume to show, nor do you know if there are any job openings for which you are
qualified. There are only two possible outcomes of that situation - you are told that
there are no job openings or you are requested to familiarize yourself with the company
job openings and send your resume by mail In the situation
- you have tailored your resume for a specific job opening and now ask specific questions.
. In that situation , your preparedness and planning have already recommended you well,
which of course is an effect you wish to achieve when discussing how to finance your small
business.
What bank lending officers, SBA employees, and/or investors will see in an established
business identity is not merely your business card, web site, and EIN, but your
entrepreneurial and business organizational skills, your resolve, your go-get-itness, and
so on. The established business identity shows that de facto you have already began your
business, which of course is the case, because you have already switched your mental gears
from contemplation to action. Thinking about the team you need to operate your business is
thinking about your business. Thinking of good names for your business and your web site
is thinking about your business and your competitors, and about marketing your business.
Thinking about whether your business is to become a Me Inc or another type of entity is
also thinking about your business.
Thinking about all those matters, obtaining an EIN for your business, building a
rudimentary web site, designing your business card and stationary - all this establishes
your business identity and actually builds your business into a reality for you. By the
time your business identity is established, the business exists as an entity that is
separate from you, which is in fact what your business lenders/investors want to be sure
in.
Moreover, by the time you have established a web site and your business has its virtual
existence, you can apply for a business credit card from some such company as American
Express. In so far as the first business expenses are concerned, the entrepreneur will not
hesitate to use a business credit card, which after all is a good beginning for
establishing good credit for your business.
To say that you have established your business identity is not to say that it is writ
in stone and cannot be changed. People change, businesses change, the change is the only
thing that does not change. After all, your business is to grow and develop! After your
business is financed, you may want to improve the design of your business cards and of
your stationary. You will need to improve upon the rudimentary web site created as a part
of your business first identity. . You will be wise to want to invest into such
Intellectual Property as TradeMarks and Service Marks and/or Patents. You may be able to
hire permanent employees, and so on.
^Top of page
A Ten Step Guide for Getting Ready to Finance Your Small
Business
- Name it
Your Business name has to be different from any other business name that is
registered in your state. For one thing, a state business registry will not let you
duplicate some other business name. For another, you t want a business name that neither
duplicates nor resembles another business. You want your business name to be memorable.
Before you decide on your business name, check with your state business registry if a
few good names you come up with are still available. Since you will also need a web site
for your business, make sure that a domain name corresponding to your business name is
also available. If it is, proceed to the step 2 without much ado, because that domain name
may be gone in a few seconds.
Need help in naming your business? Read Domain Names 101
Need a good business name? Idea Merchants CO can help.
- Domain it
One of the domain names you want to register is the name
corresponding to your business name. So, if you business name is Bookoholics Int, you will
also want to register the domain name www.bookoholics.com
Helpful Hints:
- If you are planning to offer a variety of services and/or products, it is a good idea to
register domain names corresponding to those products and services. For example, if
Bookoholics Int sells not only books but also gadgets, video cassettes, and electronics,
you will be well advised to register also such domain names as, for example www.ebornebooks.com, www.ebornemovies.com, www.eborneexpresss.com, www.micro-appliances.com, www.vcrxp.com , www.vcxp.com, and www.televisionxp.com
- Although presently a great variety of domain name extensions is available, it would be
to your benefits to register a dot-com or dot-net or both for a for profit business and
dot-org for a non-profit business. Read Domain Names 101 , a good
introduction to the art and practice of web site naming and using multiple domain names as
an effective internet marketing strategy. Should you need help of a naming consultant,
contact naming@DNadvisor.com or dnadvisor@aahdomain.com
- Establish your business contact information (email and s-mail addresses, and a
phone line)
If you begin your business in the absence of an office outside your
home, it is a good idea i) to rent a PO Box, ii) order a phone number dedicated to your
business, and iii) establish your business email address Even before you have designed
your website, you can begin using its address for your business email. Some registrars
offer free email address with each domain name you register. Other registrars, offer email
as a paid option.
Helpful hint:
- You can also temporarily host your domain at www.mydomain.com
servers, which is free and which provides you with free email forwarding. By making your
new domain reside at www.mydomain.com, and
forwarding its email to your personal email address, you will be able to receive messages
addressed to ceo@bookoholics.com , info@bookoholics.com, and anything else
at bookoholics.com
- Register it
To register your business with the business registry of
your state, you. will need to decide whether your business name is merely a DBA (doing
business as) or other business entity, for example a corporation or a Limited Liability
Corporation.
By now, the business registry forms are available on line. However, it is not likely
that you will be able to register your business on line, because your original signature
is required. Fill in the form on line and then fax and/or mail it to your state business
registry
Helpful hint:
- Have in mind, that the original incorporation/registration, in many states, does not
require more than one person and that you do not need an attorney to file a business
registration form.
- Request EIN - an Employee Identification Number - from IRS
The SS4
form, as all other IRS forms, is available on line. Fill in the form on line and then fax
and/or mail it to the address specified for your state by the form instructions.
- Open a bank account for your business.
Helpful hint:
- You will do well by connecting your business account to your business EIN rather than to
your SSN (social security number).
- Order Business cards and Stationary
At this stage, you should not worry
too much about EITHER your logo or the quality of paper for either business card or your
stationary. All you need is a card with your your business name, address, and phone
number, and your own name and title. You can have 1000 business cards - black on white -
printed for only $30.
Helpful Hint:
- Do not forget to include your business web address and email address into both your
business card and your stationary)
- Establish a simple 3-5-page web site for your business.
Once again, at
this stage you should not worry too much about the particulars of design. What you need is
a basic site that tells what sorts of products and services your business is going to
provide, how you can be reached, and who is on your team. At minimum, your web site should
have a home page, an about us page,and an our services page.
Helpful Hint:
- Include biographical sketches and/or resumes of your key people into the about us page.
- Apply for a business credit card
Having done all the above, you will be
able to apply for a business credit card on line.
Helpful Hint:
- American
Express Small Business Service offers a variety of products (credit cards, credit
lines, debit cards) specifically designed for small businesses on line. One of the best
features of the American Express credit cards is their guarantee of anti-fraud protection
on the internet . And they are truly good about refunding an occasional fraudulent charge.
- Begin Working on Financial Projections and Researching the best terms of financing
for your business.
Homepage
GO TO MY PC
^Top of page
Useful Links and Resources:
Please note that the following links and resources represent our choice of the services
we have used and found satisfactory.
Business Cards & Stationary Printing On Line - www.iprint.com
Business Naming and Branding Consultants - www.AahDomain.com,
www.DNadvisor.com
Business Sings & Bumper Stickers - www.theSignShop.com
Coaching for Entrepreneurs & Small Business Owners - www.coaching365.com
EntreWorld Resources for Entrepreneurs www.entreworld.org
Expert Advice - Business Plans, Startups, Inc http://www.startups.com/content.jsp?page=advice_business_plans
Forms And Publications - IRS www.irs.ustreas.gov/prod/forms_pubs/index.html
Free Domain Management Tools - Forward your email to an existing email account Forward
your domain name to any Web site www.mydomain.com
Internet Business Ideas & Trademarks for Sale - www.Idea-Merchants-co.com
Internet Psychology Research & Web Site Usability Testing - www.ipri.org , www.internet-psychology.org
NASIRE - State Search- Economic Development & Commerce https://www.nascio.org/stateSearch/displayCategory.cfm?Category=economic
Nolo Self-Help Law - Legal Information, Books, Software and Forms http://www.nolo.com/
Nonprofit-Specific Legal Information http://www.mapfornonprofits.org/library/legal/np_genrl/np_genrl.htm
Web Site Design & Development - Blue Fan
valerie@humanskin.net
Web Site Hosting - www.saffas.com
$15 Domain Name Registration - www.DNadvisor.com,
www.Santa-Sends.com
U.S. Business Advisor - a one-stop electronic link to all the information and services
government provides for the business community www.business.gov/
US Office of Patents & Trademarks - Trademark Information http://www.uspto.gov/go/tm/
U.S. Small Business Administration's Small Business Startup Kit on line - Find
information on the types of business organizations and the pros and cons of being a sole
proprietor, a corporation, a partnership, or an LLC Limited Liability Corporation); on
financing your start-up via SBA guaranteed loans and via other financial institutions, on
how to write a business plan and loan proposal, on how to register your business, obtain a
license, an so on. http://www.sba.gov/starting/indexstartup.html
^Top of page
Help Us Raise Money For The Internet Psychology
Research Institute!
Please help us raise money for the Internet Psychology Research Institute
(IPRI), a non-profit a 501 (c) (3) organization located @ www.ipri.org,
by buying and/or trying products and services we advertise. All profits
will be donated to IPRI.
Free
Credit Report & Score from Experian
Stop scratching your phone number on a dirty napkin! Get a personal business card FREE right now. It's easy!
Click here.
ow. It's easy!
Worst
Case Scenario Travel Book
Crocodile
Hunter Biography Book
Home Star Theater w/Video
Discovery
Channel Macro Microscope
Odyssey
III Interactive Globe
AIBO
31L Robotic Dog
No
Monthly Fees Web Hosting
Access
Your PC from Anywhere - Free Download
^Top of page
Starting Small Business
