7 ways to kick start your new business
Emcee: I'd like to welcome everyone to the third in our SunTrust Best Practices webinar series, Seven Ways to Kickstart Your New Business. These webinars are informed by research conducted with small business owners across the country and by our work with SunTrust clients. Starting a business can be stressful, frustrating, scary, and tremendously rewarding. For many of the 550,000 entrepreneurs who start a business each year, it can be the fulfillment of a life dream. For economists, small business starts and the employment they generate, 48% of the US workforce according to the SBA, are the engine of our economy. We're excited to bring some great resources to bear to help reduce your worry list and move the ball forward in building a successful start-up.
Today's presentation may be accessed under the Resources tab on your webinar console and downloaded from there. Also, listed is an accompanying best practices research paper on starting a business. Please type your questions into the Q&A section of the webinar console at any time during the presentation. We will collect questions and address them during the Q&A session at the end of the webinar. A recording of the webinar will be available to you after the session if you want to share today's lessons with others.
Today we welcome David Hiller, Senior Vice President here at SunTrust. David is joined by Jeanne Rossomme. Jeanne is the author of The Secret to Getting Better Customers, and founder of RoadMap Marketing. Over the past 20 years, she has worked with and spoken about starting and growing small businesses. Dave, I'll turn it over to you.
David Hiller: Thank you, Barbara, and welcome, everyone. I'd like to start by highlighting that SunTrust is a purpose-driven company. Our purpose is lighting the way to financial well-being. This means we're focused on helping our clients, both consumer clients and business owners, take actions that increase their financial confidence and well-being. As part of our commitment to small business owners, we've published a small business best practices guide; we've developed a set of online financial assessment quizzes for small business owners, we've written an in-depth set of best practice reports; and we have a variety of resources like this webinar that focus on specific topics.
Several months ago, we completed a nationwide survey of small business owners to understand how they view their current financial health, their business and financial priorities, the action steps they're planning to take over the next 12 months. The survey had some very interesting findings, including insights from business owners with recent start-ups on how they approach business and financial decisions. So, we'll spend the first portion of the webinar understanding what's on the mind of business owners who've recently started a new business, then we'll spend the majority of our time on practical action steps you can take to help put your start-up business on stronger financial footing. We're very fortunate to have Jeanne with us today. Jeanne has a wealth of knowledge and direct experience working closely with start-up businesses, so, she'll share some of the stories and lessons learned that I'm sure will be relevant to all of you.
As we move into our survey findings, it was clear from our respondents that the most common reason for starting a business was the desire to work for themselves. 65% cited this reason, while only about a third were specifically focused on pursuing a new idea or product. The motivation to get out and make something happen on your own is a powerful driver for action. However, the vast majority of the time, new business owners don't really understand what they're getting into and end up taking more risk than necessary simply because they don't have the past experience or current guidance to adopt good practices around business and financial management from the very start. You all know the stats on business failure. SBA tracking shows that 25% of new businesses fail within a year, 50% fail within five years, and about two-thirds fail within 10 years. So, while the desire for self-employment or a passion for a product is a great motivation to start something new, it's not enough to guarantee business success.
The purpose of today's webinar is to briefly highlight some of the practices that new business owners should put in place to improve their chances of building a healthy, sustainable business.
Jeanne Rossomme: You know, Dave, I'd like to add a few things to this great research that you've already done. Coincidentally, I just helped SCORE, who's part of the SBA, do some qualitative research on start-ups and on the people that start up and why. And when we peel back these statistics a little bit, it's interesting. With regards to female start-ups, many of them look at family factors as to the timing of when they're going to start their business. But those family factors are quite different. some women start it before they have children, some say, "I've just had a child and I want a more flexible work environment," and others say, "Well, I'm an empty-nester now, and so, this is a good time to start my business." And that's a little bit of a nuance with regards to female entrepreneurs. And then people over 65, the majority of them were saying that they were starting their businesses to supplement their incomes.
One thing that I've go to say, I've always been really fascinated with is what is the secret sauce that makes a successful business owner? I've worked with many over the years, and I've always been looking at that to say, okay, why do some businesses do really well, and then others are part of these statistics? And I'd like to also, cite another interesting study that's been going on for about six years called the Startup Genome Project, and that is a project that's been done in looking at over 10,000 businesses worldwide, looking at tons of factors and then determining which were those key success factors. And interestingly they fall into three distinct categories.
The first is around the owner him or herself. Owners that are successful tend to be very motivated and extremely committed. They have the patience to ride out the low times or the slow times, and they're also, super open to learning and to growing and to constantly changing. So, those are the characteristics of successful business owners. The second are the people that that owner surrounds him or herself with. They basically are open to influence, but they also, are careful in getting people that really know what they're talking about around them and constantly talking to others. And then the third is money, but maybe not in the sense you might think, is that successful owners are the ones that have enough at the beginning to get through that initial start-up period where you're going to definitely be spending more than you're going to be getting in the door, and enough time at the beginning to be able to test ideas before it becomes a profitable business.
Hiller: Jeanne, those are some interesting themes from the study, and I think we'll see those factors play out in the rest of our research here that we're going to cover in getting into the action steps. Moving on to this slide, you've stepped out and made the decision to start a business. Most owners feel overwhelmed by both the ambiguity of the situation and the number of decisions and actions that need to be taken quickly, often with limited information or expertise, and as a result of that, there's often a gap between what business owners know is important and where they actually direct their focus.
Take a look at this chart. It covers several basic, important steps in building a firm foundation for a start-up business, from creating a business plan, setting up financial software, ensuring adequate funding, separating business and personal accounts, and figuring out staffing. There's no confusion around the importance of each of these issues, but over half of new start-ups said they felt the tasks were too challenging, and so, were avoiding dealing with some of them. Jeanne, what do you see from the businesses you work with and how can a new business owner get their arms around the breadth of important tasks they need to complete?
Rossomme: You know, Dave, I see so many entrepreneurs that, you're right, don't complete these steps, but it's not because they're lazy or really don't know what to do. I think there's some psychological underpinnings to this that I'd like to talk about. When I started my own business, for example, I was coming from a lot of big companies, I'd worked for Shell Oil, I had worked at GE, I'd gotten my MBA in Marketing, I'd worked for DuPont, so, I had a lot of business background, you'd think that would make it easy to start a business myself. But what I found is that it was a substantial change to go from working for someone to working for myself. And I think that those are some things that everyone should think about as they're starting up their business. First of all, that we're coming from this highly structured environment when we're working for someone where we have all of the tasks in front of us, we know what we're going to do every day, we're going to an office. Now we must leave that structured environment and create all of our daily schedule for ourselves.
Secondly, we must do everything ourselves, we can't call the IT department when our computer breaks or ask an accountant a question, we basically must either figure it out ourselves or get all the resources. So, that's another pretty substantial change. And then finally, I think something that comes as a surprise, it even came as a surprise to me, is that it can be kind of lonely. Suddenly, you're used to having a social network within your business environment, and you're spending a lot of time by yourself. Which is why it's going to be important to develop that network of new people that have their own businesses and entrepreneur groups to make yourself feel good and confident and be able to do what you need to do.
Hiller: So, when we asked recent business start-ups about their top challenges within the first year, there were a few that were cited most commonly. 65% had trouble marketing effectively, 49% experienced challenges keeping expenses in check, 47% struggled with enough financing or funding, and 46% had issues with time management. The picture that comes out of our research, and one that many of you are experiencing right now, is that starting a new venture takes a lot of hard work, focus, discipline, preparation, and flexibility to address opportunities and challenges as they arise. Most new business owners are not completely prepared for that, and need practical guidance and support along the way, as Jeanne was mentioning.
Rossomme: But we really don't want you to feel overwhelmed, because feeling overwhelmed can make you feel frozen. But on the other hand, being cavalier can also, cause great financial cost and risk. So, we'd like to think of the analogy of this being a journey, like hiking into the woods. If you do not plan or pack, clearly, you're going to fail, you're not going to have what you need. But if you pack for every single occasion, your backpack is going to be so, weighed down that you're never going to get to start. So, the purpose of this talk is to give you a sense of what are some of the essential things to consider, and we're hoping that it will serve you as a guide on your journey and help you navigate the risks and obstacles of going into this new and unfamiliar territory.
Hiller: Now let's get to some practical action steps that you can focus on and implement to increase the chances that you'll be one of the businesses that survive and thrive. As Jeanne said, executing on these actions won't guarantee success, but ignoring them certainly puts your business at risk. Let's quickly highlight the seven areas, then we'll go into more detail on each.
Number one, get going on the entrepreneur's to-do list. Number two, prioritize the most critical areas. Three, ramp up marketing and sales. Four, make sure you have enough money. Five, be frugal, but wise. Six, manage time wisely. And finally, staff appropriately. You may be thinking to yourself that these are just a lot of common sense, and you're right; none of these is difficult. The key is to not get overwhelmed but to move forward quickly and efficiently on making each one of them happen.
Rossomme: And you know, Dave, I would add to that that for all of you out there to jot down notes when something feels especially important. Really at this webinar, we're hoping that you just get a couple of action items that you can move on quickly after we finish. So, if you could just write 1-3 things that are things that you know you want to do, that's going to make this most effective. We're going to be talking about all kinds of topics, so, also, jot down any questions you might have; we're going to answer them at the end. But if there's something that you think of later or that you would like to have answered individually, I'll be available, I'll give you my email so that you're free to email me at any time and I'll either find an answer or find a smart person who will.
Hiller: As a reminder, if you have questions that come to mind as we're going through the material, there's a Q&A section on your screen that you can type them into and it will queue those up for the end of the webinar when we can address them.
So, let's get to number one, get going on the entrepreneur's to-do list. As you start a new business, there are several administrative matters that you have to take care of simply to operate as a business. What is the name of your business? What legal structure will you have? Where will you do business; from your home, a shared office space, a dedicated office, an industrial space? What permits and licenses will you need? Where will you set up your business checking, credit card, merchant services, or other accounts? And do you have intellectual property that you'll need to register or protect? The key on these is to move quickly; don't procrastinate. You'll need to make decisions carefully and prudently without getting bogged down in indecision or analysis paralysis. Delaying decisions or actions in these areas usually leads to a delay in business operations, meaning revenue, and could lead to costly or complicated re-work later in the life of your business.
Rossomme: You know, Dave, I'd like to add also, a few other pieces of advice based on experience. First, the first item and the last item are things that often can really bog people down unnecessarily. When they want to name a business, many people get stuck here because there's a lot of URLs that are taken, and so that can be complicated. But the reality is, is that you just need to find a name that's pronounceable so, you can capture word-of-mouth and, unique. But if you're in a local market, it just matters that you don't have someone with that name in your local market. If you're at a national level, then you just want to make sure that it's not someone who's in your industry. someone who has that name in a different industry, it's not considered competition. So, that might help you in naming your business.
On intellectual property, a lot of people worry about protecting their ideas, but the realities are that getting a formal trademark can be expensive and lengthy and tough to protect. So, the most important thing is to start using your intellectual property, because then you show that you were out there using it, that'll be helpful later. Make sure you have a viable business and then you can go from there later in hiring a lawyer and protecting it. With regards to legal structure, a lot of people like to do partnerships because they're worried about starting a business and they think it's going to be a great idea to work with someone else. I was advised this, and it was a good piece of advice. Be wary of partnerships. You really need to think through upfront an agreement as to how much time and capital each person is going to put into the business and how committed each person is to the business. So, if you're thinking of that, I would ask you to reconsider.
With regards to location, online is a wonderful way to test products and ideas very cheaply before you put in any investment yourself. You can go to aggregators like Etsy to try a product out and see how it sells, or Upwork which list various kinds of services, so, you can test that out. With regards to permits and licenses, another thing that I've seen a lot of times is there'll be people who are trying to say that they'll do all that work for you for a couple thousand dollars, if you're in an industry that needs it. And, you can save that money by going to your local county business site, and you can see what's required. And usually they provide help, or a lot of industry organizations provide help. So, that's going to help you with permits and licenses.
And then, finally, with regards to banking relationships, separate your personal and your business accounts. The reason that I give that piece of advice is not only does it help you just in terms of accounting and, God forbid if you're ever audited, it makes things much cleaner, but more importantly, it gives you that owner mindset, that you start looking at your expenses for your business as a different thing than you would look at spending money in your personal life, and that's going to get you the right mindset.
Hiller: An important part of getting into the right mindset as a business owner is to be able to prioritize the most critical areas. When we asked new business owners what they wish they had spent more time on, three areas came up consistently. Not surprisingly, two of the three deal directly with generating revenue, which is critically important in the early days of a business. The number one item was marketing. If you remember, this was also identified as a top obstacle during the first year of operation, and we'll talk more about that in the next step. Closely related to that is sales. Start-ups are in a race to ramp up sales faster than costs and expenses. We'll talk about marketing and sales a little bit more in the next slide. And then the third item was completing a strategic business plan. A good business plan is not just a dry, static document. It outlines your overall strategy for doing business: what products or services you'll provide, to what type of clients, and how you'll compete and win in the marketplace. It creates a roadmap for growth, and it outlines specific tactics and steps that you'll plan to take along the way. A good business plan is also critical if you're looking to any outsiders for either advice or funding. Jeanne, based on your work with start-ups, do you agree, and what would you add?
Rossomme: I would say that the biggest problem that we have in starting a business is around focus and consistency. Most people shy away from business plans and think that they don't really want to do them because their vision is this 30-page volume that's going to take months to write. Here's an example of a business plan that I've found to be extremely helpful for getting things on paper without spending too much time. It's called the Business Model Canvas, and it's free online or in print. Let me give you an example of how this works. I know of a woman entrepreneur, and she had a very successful consultancy, but she really wanted to get out of the hourly rate that she was charging and have a business that would work without her, and she had an idea for a piece of software, an artificial intelligence piece of technology that she could offer to her clients in the financial services industry. Her thoughts were all over the place, as for many of us, and so, we sat down and used this Business Model Canvas as a way that she could put down the main blocks of what she looked at for this new business concept.
On the right-hand side of this canvas is the revenue, things around customers, the type of people that you're targeting, the value proposition, how you're basically going to make money. On the left-hand side are the expenses or the things you need to do to create the product or service in the first place. So, in her case, after we had filled all this out, and because she had so many thoughts in her head it was really a very fast and efficient thing, we found that the big hole for her was around technology and that she really needed to find (because she wasn't a programmer herself) someone that she could really trust that could be able to create this artificial intelligence piece of software. That gave her focus for the next few months. so, this type of business plan is a really good way to start.
Then from there you have an action plan. As I just mentioned for her, it was finding a programmer and getting that process going. So, create an action plan for three months. Don't do more than that, because honestly, you're not going to be able to see further than that. So, just create a plan for yourself for three months, make sure you have some sort of measurement or an accountability partner, like a mentor or someone else like that to make sure that you're on track. And then, talk to everyone. The most successful owners I know are always learning, always out there showing their business concepts and getting reactions from other people.
Hiller: Moving into our discussion of marketing and sales, we've seen that not only is it the top challenge at 64%, but it's also, the number one area that business owners, in hindsight, wish they had prioritized more. Revenue is the lifeblood of a new business; it's the proof that clients value your services, and it's also, the source of your future paychecks. So, solving the marketing challenge means starting effective marketing and sales early to get exposure and build a pipeline of leads. It means identifying your target market, developing plans to effectively reach that market, budgeting wisely with a mix of marketing channels, and finally, very importantly, talking to real potential customers.
Rossomme: You know, Dave, I could not agree more. Unfortunately, many people confuse marketing and sales, as well as what they should spend money on and when. Marketing is getting leads in the door and getting the word out that you and your product exist. Many make the mistake that they think that their market is everyone, and that if they have a target market that they're going to somehow limit potential revenue or potential customers. But the reality is the opposite is true. The more specific your target market, the more successful you're going to be for two reasons: One is it's a heck of a lot easier and cheaper to market to a very specific target than to market to everybody. But more importantly, you're talking to a specific person, someone who really has value for what you are saying and that's going to make you much more effective.
Now, only you as an owner can decide who's your customer tribe, so, you want to spend your time talking to real people as much as possible, especially at the beginning, finding those people who really will pay and find value for what it is you're offering and why. Then you're going to find your niche and go from there. Once you have your target customer and your value proposition it's only then that you should start spending money on marketing tactics. A lot of people make that mistake. Until you know what you're selling, what the value is, and who you're speaking to, you don't want to be spending money on websites, collateral materials, and social media unless you do have the funds to be able to constantly be changing them.
And use the web to test ideas. One example I'd like to give is there's a woman in my entrepreneur group - she's a serial entrepreneur - she has a digital marketing company, and she's also, a blogger. And several years ago, she was writing an article around thinking about letting her hair go gray, and she got a lot of response to that article. So, she wrote a few more and she found that her following was growing. And then eventually she created a new business called Going Gray. It's a blog where she writes around this issue of letting your hair go gray, and she has all these sponsors and advertisers who sell products specifically for that target group, and it's become a successful, revenue-generating business. So, that's a good example of using the web to test out a market idea.
On the sales side, my big piece of advice there is to focus on closing the bigger sales. So, a good example here is I think many of you have probably seen a product called Honest Tea. And the founder of that business, Seth Goldman, is a neighbor of mine, and when he started his business, he literally was making tea in his kitchen and going and having people test it out until he could get to the formula of the flavors that were more popular among a larger group. But then after that, instead of just continuing to sell it one by one, he knew that he needed to get real distribution in order to make this a viable business. Unfortunately, because he was a small company, he couldn't get in the big grocery stores as those were all sewn up by the big food and beverage manufacturers, and so, he had to basically go through smaller distributors. They were cheese distributors, and that's how he got his product into some smaller supermarkets. But it was from there that he got those bigger sales to distributors and was able to prove the viability of his product and, as you know, eventually sold it to Coca-Cola. He's the success story you see today.
So, I'd like to leave you with the fact that you will always be the chief marketer and salesperson for your company. No one is going to believe in your company as much as you do, so make sure that this is a top priority for you.
Hiller: Thanks, Jeanne, those are great stories, and I think your emphasis on clearly identifying and focusing on your target market is really right on point. The next action step may seem obvious, but it's a place where many entrepreneurs could get caught unprepared, and that is make sure you have enough money. Almost all businesses consume cash in their start-up phase, so, it's critical for you to have enough funding to get the business to the phase where it generates enough cash to be self-sustaining. When you think about sources of funds, the fact is that 81% of business owners use their own personal savings or investments as the primary funding source. 31% were able to bring in family or friends, but only a small portion, about 14%, had external financing, whether that's outside investors or loans, and that's simply because being a new business can make it challenging to obtain that kind of external financing.
Jeanne, when owners are contributing their personal savings to the business, what steps can they take to use the money wisely and make sure it's adequate?
Rossomme: That's a good point. My first piece of advice would be to build a realistic launch budget that considers both your immediate and long-term needs. You're going to need to live for a while for yourself, and you're going to need to fund your business before you start bringing in any real revenue. So, for many people, that's going to be six months to a year at least, depending on the type of business, so, really develop a realistic launch budget. Also, make sure that you just don't tap into the stuff that's important that's part of your own long-term security, like your 401k. I wouldn't do that for a business, it's just too high of a risk for you personally. And then like we talked about before with some of the marketing ideas, test your ideas and make sure that they work before you go ahead and fund them. Test a product before you manufacture it, test a marketing plan before you go ahead and fund that. So, test it before you fund it. And then follow your business plan and as you fill out that business plan and see where you want to invest, write your learnings along the way so that you can leverage those and learn as you go along.
Hiller: That leads us into our next action step, which is carefully managing expenses. Cost management is crucial in the early stages of your business because you need to spend money strategically, and that means funding important priorities while keeping expenses low, wherever possible. One of the best ways to do that is through a budget, but many business owners haven't even taken that step. Jeanne, what do you do to control expenses, and what advice can you give business owners in this area?
Rossomme: Well, I agree with you completely, Dave. The first step is to create a budget. You have no idea where you can cut costs if you don't know where your money is going, so, you should have a budget from the very beginning. You also, want to focus on your priorities. Again, going back to that business plan, where you spend your money should be linked to your business. Your budget and your business plan should be linked together to create guardrails so that you don't have cost overruns.
Another piece of advice is to use a business credit card, because that's going to allow you to easily track spending on things that have to do with your business while, not commingling the personal and business sides of your financial world. And then, track spending with financial software. Financial software allows you to streamline reporting and gives you some visibility into the numbers. I wrote a small book a few years ago called The Secret of Getting Better Customers, and the idea of that book was that your accounting data is really your goldmine. It may not seem like the sexiest thing in the world, but the reality is that your accounting data really tells you exactly where you're spending your money, and you should be tracking it not only against the products or services that you're creating, but against the customers that are buying your products or services. You're going to find out that there's some customers that are extremely profitable love what you do, it's easy to service them, they buy a lot from you, and others that really are not worth it. And so, keeping track of all of your expense and revenue data in a financial software system is going to allow you to tap into that goldmine and to be much more efficient in how you're spending your money.
Hiller: The next action step is more of an ongoing discipline, and that is protecting your most valuable resource as a new business owner, your time. Effective time management goes a long way in making your business a success. 46% of business owners found managing their time as one of their biggest start-up challenges. You're being pulled in so many different directions that you could lose focus on your most important tasks. So, what does that mean, how do you do that? Try to prioritize profit-generating tasks. 40% of sales typically come from the business owner's personal efforts, so, as you plan each day, think about the best place to spend your time. Is it generating more sales, delivering on products or projects, or covering administrative tasks?
We touched on this on the previous slide, but financial management software is a specific tool that every start-up should utilize to reduce administrative time and maintain good financial tracking. 61% of start-up owners use financial software because it saves time, it reduces errors, and connecting it to your bank can streamline your financial reporting. Also, about three quarters of small business owners use online or mobile banking, which gives you instant access to your bank accounts and much better cash visibility and spend tracking. So, Jeanne, what advice would you give business owners on the overall topic of time management?
Rossomme: You know, Dave, I think you hit the big ones. And this is kind of the drumbeat of this entire webinar, but what you want to do is you really want to spend time on that revenue-generating stuff, marketing and sales, and the successful businesses are the ones where the owner is always doing that. I think that one of the pitfalls we fall into with regards to time is that we like to spend our time on things that we're comfortable with. For example, many people who are artists who start a business want to spend all their time creating art as opposed to finding a way to sell that art. But basically, that may not be the most valuable way for you to be spending your time. So, look at your business plan and what you need to do, and spend a lot of your time on marketing and sales. Then you want to hire people for areas where you do not have expertise, usually that's going to be an accountant or a lawyer. And, you want to hire people to take off your plate things that are time-consuming and not the highest use of your time. Think about an administrative assistant. That's going to really help peel way tasks and allow you to focus better.
So, let's talk a little bit about getting staffing help. The last action step we're going to cover today is about staffing. Every business owner needs to think about all the tasks that need to be done and then, figure out who's going to do them. It's relatively rare for any owner to be able handle every single aspect of a business on your own. However, luckily, the way the market is now, is that doesn't mean that you have to go out and hire full-time employees, there's many options and the research here shows that. So, you can also, hire someone on a part-time basis as an employee, you can get in consultants, interns, or contractors. And many people use their spouse or other family members to help them in those early stages as they're starting their business.
But I'd like to spend just a couple minutes talking about the difference between a contractor and an employee. An employee is when you have ongoing work that you know is going to be ongoing, and you really want a reliable resource, as well as someone that's going to support your business and your brand. That's an employee, someone who's intrinsically connected with your business. A contractor is an autonomous person that peels off a section for you, and usually has special expertise. An accountant would be a good example of a contractor, or maybe a website designer, people like that. With regards to interns, I really suggest that you make sure that you're paying your intern. That could be either in money or some other thing of value. If you're getting it through university, it'll be in credits for a course. But if you pay them, then the intern is more likely to understand the rewards that they're getting, and they're going to be more committed. And, you're going to be more committed with regards to that intern.
Speaking of interns, and not just interns but contractors, employees, part-time or full-time, there is going to be a cost or time in training or in onboarding any new person you bring in, so, make sure that you account for that in your own budget of time and money, that it's going to take some time before they get on board. One business owner that I know, she has a pretty successful financial and accounting business, and she's grown her business to about 15 people. Over the years, she's had to do a lot of hiring of people, and what she started doing recently, which I think is a really good idea, is this idea of creating trials. After she's basically posted a job, she's sorted through resumes, she's maybe done some sort of phone interviews, and she's whittled it down to a few people that she thinks will be a good fit, she basically pays them an amount of money, say $100, to come in for a couple of hours into the business, and then she gives them tasks that would be the normal tasks that they would have in working with her. In that way, she can go ahead and see how they really perform, and not only how they do the task, but what kind of questions do they ask, what are their communication skills, what are their analytical skills, how do they approach things, their personality, etcetera. And it's really been a really good way of her getting better quality contractors and employees.
So, Dave, is there anything else that you think that owner should think about with regards to staffing?
Hiller: You know, I really like the flexibility that you highlighted with contractors, interns, but I would just say, if you're hiring full-time or part-time employees, it's important to be very buttoned up on the hiring process. You need to understand your local, state, and federal employment regulations, and create a checklist to make sure that you're following those steps. The SBA has a good checklist that covers things like obtaining an EIN (employer identification number), setting up records for withholding taxes, verifying employee eligibility, registering with your state's hew hire reporting program, obtaining workers comp insurance, posting required notices, and filing your payroll taxes. So, things that maybe wouldn't normally come to top of mind you need to make sure that you're covering. And finally, set up a good payroll process that will help you not only pay your employees accurately on time but also, help you with data tracking and regulatory reporting obligations. So, look for a payroll service or maybe even software where you can automate the payroll process, the data, and the taxes.
As we wrap up, let's do a quick review of the best practices we've just covered, and I'm going to ask Jeanne to give us a quick sound bite on each one of these as we go through them. Number one, get going on the entrepreneur's to-do list.
Rossomme: Yes, make sure you get your basic tasks done first, the ones that are going to affect your setting up the business from a tax and regulatory perspective, as well as getting money in the door.
Hiller: Number two, prioritize the most critical areas.
Rossomme: For prioritization, we know that the three items that start-up owners wish they had spent more time on are marketing, sales, and a basic business plan. We gave you some tips on that. So, make sure you focus on that first and learn from your peers.
Hiller: Number three, ramp up marketing and sales.
Rossomme: Talk to customers, make sure you talk to customers and potential customers all the time from the very beginning, and get awareness of your business as quickly as possible so that you get income in the door.
Hiller: Number four, make sure you have enough money.
Rossomme: That means make sure you've got enough funding to get you through that start-up period, look at all your funding options, and make sure you keep your business and your personal finances separate.
Hiller: Number five, control expenses.
Rossomme: Yes, you basically are not going to be able to afford cost overruns, so, create a budget and use a credit card, a business credit card, to help you in controlling and managing your expenses.
Hiller: Number six, manage your time wisely.
Rossomme: Time is your most precious resource and the one that you have that's most limited, so, you're going to have to wear lots of hats and make sure that you use your business plan to help you focus on the priorities of profit-generating tasks.
Hiller: And finally, staff appropriately.
Rossomme: Get the help you need, don't go it alone. Staff appropriately with the right mix of both full and part-time employees, contractors, and other interns and freelancers. Make sure that you have the extra burden of staff is being covered by following the local regulations and using online payroll reporting and systems processing.
So, we've gone over these, I hope that you all have written down 1-3 suggestions or actions for yourself that you can follow that'll make it a good use of your time. And on the right-hand side here we have some resources that could really help you out. SunTrust has put together a great small businesses best practices that could be useful. I've mentioned SCORE a couple of times, they're part of the SBA, and they are the largest network of free mentoring services in the country. You can either get an online mentor or you can get one through your local chapter, and that can really help you in some of these early stages as an accountability partner or someone who's got expertise in your industry. Look at industry associations and entrepreneur groups, important for getting ideas and costing and support. And then finally, that is my email, firstname.lastname@example.org, so, that if you have any questions that don't get addressed in this upcoming section, you can feel free to email me at any time.
Hiller: Jeanne, thank you, we really appreciate your expertise and participation in this webinar, and particularly those resources that you just highlighted. So, now we'll move to the question and answer section of today's webinar.
Great, well, I appreciate everyone joining our webinar today. Looking at some of the questions that have come in, let's start with this one: Do you have tips or guidelines for determining when to hire employees for growth? As part of step seven, we talked about different staffing options, but Jeanne, in terms of timing on when an owner should look to bring on either a part-time or full-time employee, what guidance would you have around that?
Rossomme: You're right, this is a tricky question because normally you need some capacity if you want to grow your business. So, I would say that a lot of times it's when you're feeling like you are over capacity and that if you get some things off your plate you can go ahead and grow, that's going to help you in hiring an employee. If you know you want an employee because you want to have someone that you can direct and that's more committed to your business, you may want to talk to them about being hired with the understanding that you could ramp up the number of hours that they take on, so that it allows you to basically not putting out so much before you have the revenue to meet it. So, that's one suggestion for determining when to hire your first person.
Hiller: Great, thanks, Jeanne. Here's another question that's come in around how to find the right co-founder or partner. I know you gave some caution in terms of having a partnership and that being a recommended business model, meaning that it's usually easier and more straightforward to go it alone, but if someone is looking for a co-founder or partner or needs some additional skill set, how would you go about looking for that person?
Rossomme: I'm thinking back to my experience in working with lots of businesses and the ones where it's worked out. Usually it's when people have individually started their own businesses, they've got some success, and they decide to come together to scale and to complement each other. And, the reason for that is that once someone has also, started his or her own business, they know what it's about, they know how much is committed, they've already got some success in bringing in customers and creating products or services, they know what's going on. So, it's less theoretical and you have a track record to look to. So, the most successful partnerships I've seen have been people that already had their own practices of some sort or their own businesses of some sort, and they decided to come together.
In other cases that I'm thinking back to where I know there's been multiple founders, within a year, something happens. One of the people tends to bail, and the other two are left holding on if it's more than two people, or the one person has to buy out the other person, and it gets pretty complicated and becomes its own project, and a distraction from your business. So, that's why I would say maybe at the beginning, work on going it alone, use the other people as your advisors, etcetera. And then, as time goes on, you can really develop a good working partnership.
Hiller: Good advice, and I would certainly agree based on experience and what I've seen is that it's much, much easier to be the sole person in charge. You could certainly hire people as consultants or part-time employees if you need that set of expertise, but in terms of running the business and being in charge and making decisions, it's much easier if there's one person on the hook for that. Let's go to our third question here, which is around what are the best ways to build a network of advisors who could provide ongoing guidance and support?
Rossomme: Yeah, this is a critical area, and it does take some time. So, I guess I would say is there's not a silver bullet, there's going to be a lot of people trying to sell you a silver bullet, and there are some networking groups where you must pay substantial fees to join. At the beginning I would not do that. I would really explore a lot of the free options, just because it is really a process of exploration. So, the first free resource is SCORE which has free mentors that can help you in getting either industry background, accountability partner, someone to help you with the basics of starting a business. That's what they're there for, so, they'll give you the time. So, that's one way to start that's really helped a lot of people.
I think a successful thing that I've seen for many businesses is to reach out to other business owners that might even be in your same industry but in different locations. So, say you're starting an organizational planning company or something like that in your local area, and you've really admired somebody's website who's across the country. You could reach out to them and even create a network of those related businesses where they just share best practices and talk to each other and really help each other because they're not competitors since they're in different markets. Industry associations can also help you with that as well.
As far as the traditional networking groups go, my advice there is to go in asking: what is it that I really need from this networking group? because different networks and groups satisfy different purposes. some of them are just around lead passing, so, it's around people passing leads to each other, and that's fine, and that can be useful. But other ones are about just sharing best practices and as a safe group for you to bounce off ideas or things that you are struggling with, or that you're thinking of doing, and that's a different kind of group that you need to gel with personally. Another area might be incubators or workspaces. These co-working spaces have a lot of people with start-up businesses, and it's a really good way of having that community that we talked about a little bit so you don't feel so isolated, but also, having people that maybe have some resources, are a few steps ahead of you and might be able to provide some advice. So, that's another way to go about it.
But I think the key is to try different things, go to meetings for a couple of times, not just one time because you may hit a particularly good or tough time. Try it a couple of times and see if it's accomplishing the purpose that you really need. And once you have that, then you can go ahead and dedicate your time to those groups. They can be really, helpful for you in getting your community and getting good advice and surrounding yourself with good advisors.
Hiller: That's helpful, I know every business owner needs advice and guidance and support for different areas at different times, so, those are some really good practical tips on how to approach that. Here's another question that came in: Jeanne, how should a business owner think about starting a business on the side while continuing their full-time job? What's the right approach there? When is the right time to quit your job and go full-time into a business? Any advice or experiences on that?
Rossomme: Well, I would say that the ideal situation is if your employer is in the industry in which you want to start your business. If they're not, then it's a tough time management. But I think a very, very smart strategy, honestly, is to work for someone in the industry in which you want to start. For example, even if you want to start a restaurant, working in someone else's restaurant is probably the best thing you can do. You'll learn quickly what they're doing well, what they're doing badly, and on someone else's nickel, you’re going to be able to figure that out. Also, many times if you're working for someone and you've decided you're going to create your own consulting group or something that's in a related field, oftentimes when you leave, they can be your first client. That happens a lot to people. So, basically looking at selling services in something you're working on right now is great. If you're not, then you're going to need to be really disciplined around setting aside time aside from your full-time job to be working on your business concept, you're going to need to block that into your calendar. It's tough but doable.
Hiller: I remind everyone that most employers also, have employment policies that relate to doing work outside of your full-time job, so, in some cases you'll need to seek permission for any external activities. Let's go to our next question: What are my options if I don't have enough personal funds to get my business off the ground? Should I apply for a bank loan or look for something else? So, let me give a perspective on bank lending first and, Jeanne, I'll turn it to you after that. For a new business start-up there's typically only one form of bank lending that you'll likely qualify for, and that's a business credit card. It's relatively easy for a new business owner to obtain a business credit card based on their personal credit history. Now, we would recommend using that primarily for purchases, as it's a relatively expensive way to borrow funds, meaning if you revolve balances or don't pay your balance off in full each month, you'll likely have an interest rate somewhere between 15% and 20%. That is typically the way that a bank would provide any kind of credit to a small business owner right at start-up.
For a traditional loan, banks are normally looking at a couple years of stable cash flow from operations to prove that you can repay that. So, traditional bank loans are normally not available for brand new businesses. Jeanne, aside from that, thoughts on other options, creative options for funding?
Rossomme: Sure, here’s my perspective. First on crowdsourcing. People hear the stories of a Kickstarter campaign, and it just got somebody to take off. What we're seeing though with crowdfunding is that now it's becomes so popular that it's extremely hard to get your pitch out to get some sort of traction. You must have a pretty big personal network of people that you can point to this. It also, takes quite a bit of time to produce a high-quality pitch that's going to be engaging and get people to contribute money. So, it's not as simple as it may seem. And, the efficacy has declined as it's gotten more popular; you have to compete with a lot of other people to get attention.
The second thing that a lot of people think about is government grants; that's one of the highest Google topics for small business owners. Those are also, hard to come by; there's very few of them, and there's a lot of competition. So, I guess the bottom line is that the most realistic path is that you're going to be using your money maybe with some family help and to, as much as possible, not spend it. Do a lot of testing that's free before you go out there on your own and basically be very frugal in how you are spending your money.
Hiller: Jeanne, I agree, those are good thoughts, and I think for most businesses, the best advice is to start small. Don't put out a lot of money to get going, like Jeanne said, test concepts at minimal expense and just start small, gain some clients, gain some revenue, gain some profitability, and build from there.
Well, we're out of time for today. We really appreciate everyone joining our webinar. Thanks especially to Jeanne for lending her expertise, and that will wrap up today's webinar. Thank you, everyone.
Rossomme: Thank you.
Speakers: David Hiller, Senior Vice President at SunTrust, and Jeanne Rossomme, Author of The Secret of Getting Better Customers and founder of RoadMap Marketing
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