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Steven Tannehill: Part II - Do You Have What it Takes to Start a Small Business?

Entrepreneur's Corner

Posted: January 9, 2013 2:00 a.m.
Updated: January 9, 2013 2:00 a.m.

Steven Tannehill

 

In Part I of this article I covered the basic ingredients in deciding if you are ready to start a small business – having entrepreneurial drive and vision, identifying market opportunities, and developing a solid business plan. In this part I’ll touch on the basic ingredients needed to get your small business off the ground.

Finding money
Funding is an integral component of launching and growing your small business. It is critical that you recognize that you must provide the initial funds to start your business.

No bank or non-profit lender is going to provide 100% of the capital you need to start and fund your business during its initial phase when it is not generating a profit. Initial “seed” capital is generally drawn from personal resources, family and friends.

Additional capital can be obtained as the business develops from non-profit community lenders and ultimately via SBA and commercial bank loans. Early stage companies with significant growth potential and scalability can sometimes find additional capital from angel investors and venture capital firms.

It is important that your business plan incorporate the capital requirements of the business over time so that you can identify where and when capital will be needed and develop a plan to secure additional capital as it is needed.

Many small businesses are surprised to learn that a period of rapidly increasing sales often requires more capital, as you need to spend funds today on inventory and building capacity while the funds generated from increased sales can come as much as 90 days after the sale is consummated.

There are some types of businesses that require little capital to get started that may appeal to some entrepreneurs. Consulting or service businesses like bookkeeping and payroll services fit that profile. As always to be successful you must have expertise in and a passion for the business you choose to go into.

Organizing
A business will need to figure out how to legally organize itself. A business can be established in a variety of ways, including as a sole proprietorship, a corporation, a limited liability corporation (LLC), an S corporation, a C corporation or a partnership. Deciding how to organize your business has implications in terms of expenses to setup and maintain the ownership structure, taxes, liability for business expenses and losses, and legacy planning all of which should be carefully considered before determining which structure is best for you.

Get professional advice
Starting a small business is a complex, multi-faceted process that entails a broad range of decisions at different points in the process.

Large corporations have the luxury of a professional management team to consult with when facing a decision point in their business; small businesses often have only one or two people to make all the important decisions.
It’s important for a small business owner to recognize his or her areas of strength as well as his or her areas of weakness, and reach out and call upon the resources of professionals who can help guide you through the process and cover the areas you have less experience in.

There are a variety of resources out there, including the SBDC, which can assist a small business. SBDC services are made available at no cost to local small businesses thanks to the support of the SBA, the city of Santa Clarita, College of the Canyons and a variety of other organizations all committed to seeing small businesses succeed.

Conclusion
Starting a small business is not for the faint-hearted. It is a complex endeavor that will challenge you in ways you hadn’t expected. But it can be a very rewarding endeavor and, if successful, provide a satisfying experience and income for you and your family.

Steven Tannehill is the Director of the Small Business Development Center (SBDC) hosted by College of the Canyons. Mr. Tannehill’s column reflects his own views and not necessarily those of The Signal. For more information about the SBDC please visit www.cocsbdc.org or call 661 362-5900. To make an appointment with an SBDC business advisor please email sbdc@canyons.edu.

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