The road to entrepreneurship can be exciting, and daunting. It requires a certain type of personality, a high level of skill, and a lot of planning – including financial. Small businesses make a big impact on the economy of local communities, and the country as a whole. According to the Pennsylvania Department of Community and Economic Development (PA DCED), 99.6% of Pennsylvania’s businesses are small businesses. That accounts for nearly half of the state’s workforce. These statistics are in line with national trends. In the United States, 99.9% of businesses are small businesses, with 30.2 million small businesses across the country. This week, Lisa Hall-Zielinski, Director of The University of Scranton Small Business Development Center (SBDC), offers advice for aspiring entrepreneurs.
1. Focus on Expertise.
Aspiring entrepreneurs should consider opening a business in which they have a high level of expertise. For example, foodies may dream of becoming restauranteurs based on a love and appreciation for good food, but if they don’t have a background in culinary arts and/or the hospitality industry, attempting to open a restaurant isn’t a good plan. Get the proper training and education first, become an expert in the field, and then consider starting a business.
2. Assemble a Winning Team.
The right team can make all the difference! Aspiring entrepreneurs should consider working with the following professionals to establish, and build, their business:
It may be tempting to attempt to perform all essential business functions in the beginning to save money. However, unless the small business owner also happens to be an accountant, attorney, banker (etc…), it’s best to include the cost of hiring professionals to assist in these areas in the budget. This gives small business owners peace of mind that trusted, skilled professionals are advising them, and helps them avoid costly missteps along the way. Remember, some members of the team listed above offer services for free. There is no fee to consult with the SBDC team, and many bankers, including Fidelity Bankers, offer free and confidential consultations to their customers, too.
3. Business Plan for Success.
The business plan is a document that includes a detailed description of the business:
Drafting a business plan can seem like a daunting task, but it’s a critical step in the startup process. It will be presented to lenders and/or investors, and it will help aspiring business owners to determine the feasibility of their business. Don’t skip it! If the thought of putting all this on paper is overwhelming, ask an SBDC consultant, or a trusted business professional, for help.
4. Determine Startup Costs.
Just like every individual is unique, so is every business. That means startup costs will vary depending on the type of business that is being developed. Every aspiring business owner needs to have a clear understanding of how much money they will need, and how they will spend those funds. Here are a few factors to consider when creating a budget for startup costs:
5. Find the Right Financing.
Insufficient capital is one of the top reasons businesses fail. Avoid this pitfall by creating a solid business plan, determining startup costs, and committing enough time to do this properly. “Go to the bank and ask questions,” Lisa said. “We always recommend people do that. Even if you’re not ready to apply for a loan, you can find out what’s required, and then you can work on what they’re looking for.” It is a time investment, but it’s one worth making for serious future entrepreneurs.
The Grant Funding Myth
The number one question SBDC consultants are asked is: “Is there grant money available for small business startups in Pennsylvania?” Unfortunately, the answer is “no.” While there are continuous social media posts and articles published about all the “free money” available to aspiring small business owners, the SBDC advises people not to spend time researching grant funding that doesn’t exist for private individuals. Never pay for a list of grant opportunities for small businesses — this is the mark of a scam. The list will likely include funding opportunities for educational institutions or non-profits, and not private businesses.
Most people starting a business rely on loans, investments or personal funds. Time is valuable, and it’s a much better use of time to research viable financing options, such as:
These are just a few financing options an SBDC consultant may review with prospective business owners. For a complete list, including the pros and cons of each option, contact the SBDC.
Another important note: credit counts when it comes to starting a business. “If you want to start a business and you have bad credit, the first thing you have to do is repair your credit,” Lisa said. “Think of it this way: if you’re going to run a marathon, and you have a broken leg, what would you do? It’s so obvious – you have to heal the leg. It’s the same thing with credit. No matter what the reason is for, improving that credit score is the number one thing
that has to be done. Invest the time in that first instead of trying to jump right in. It will be worth it.”
Bankers can help in this area, too. For those who need assistance in making a credit repair plan, contact Fidelity Bank for a free consultation.
Fidelity Bank has multiple local branch offices throughout Lackawanna and Luzerne counties, and our full-service Customer Care Center is at your service 7 days a week. Call or visit your local branch office today.
Daniel J. Santaniello, President and CEO, of Fidelity Bank, publishes Financially Fit with Fidelity, your guide to financial well-being, every Thursday. If you’re interested in a financial topic we haven’t yet covered or want to subscribe to our emails, please feel free to drop us a line at blog at fddbank dot com. We would love to hear from you.