Everyday I have the honor and privilege to hear about new business ideas. Some ideas are well thought out, and others are not. Some people have always dreamed of having their own business and have carefully planned for it. Others decide to go into business for themselves after a life-changing event, such as a job loss. Over time, I have become a sort of “coach” on the steps that need to be taken before you should ever apply for an equipment or business loan. While not all inclusive, below are some common steps that will set you up for success in your new business.
Check Your Personal Credit
This is the most common mistake that I see on a regular basis. Don’t guess what your credit score is. There is really no excuse for that in today’s digital age. Websites like creditkarma.com or creditsesame.com offer a soft pull to give you information about your Equifax and TransUnion reports. Both of these websites give detailed information on your credit profile, as well as suggestions on what you can do to improve. While perfect credit isn’t a necessity, it sure will make starting your business so much easier.
Here are some tips to boost your credit:
- Keep your credit card usage high, but your balances low. Try to use 30% or lower of your revolving credit balances.
- Unable to pay down a big chunk of credit card debt? Request credit line increases on your current credit cards to increase your available credit ratio.
- Too many cards with balances? Apply for a personal loan to consolidate.
- Have a minor collection? The mobile carriers and medical bills are famous for this, and can really drag your score down. Either dispute it or pay it. DON’T ignore it!
- Don’t apply for loans sporadically. You will take on inquiries to your credit report, which will drag your score down.
- Don’t close mature accounts. Try to use them for minor purchases and pay them off quickly. Part of a good credit score includes the age of tradelines.
Taking some of the above steps to improve your credit will help you get better terms and rates for your startup loans.
Save Some Money
While saving money for an unplanned business isn’t always an option, it will behoove you to put aside some extra cash for expenses that can come up. Depending on your business, you may need a commercial space, down payments, business and other licenses, software, consulting, payroll, and training. Of course there are programs that will lend money to startup businesses, but you have to have good credit (see above).
Write a Business Plan
Business plans don’t always have to be the fancy 50 page documents you may have seen. For some businesses, such as restaurants, gyms, and breweries, they are probably a necessity because they are at a higher risk for failure. For others, such as trucking, you just need to ask yourself a few questions to make sure you are setting your business up for success. Common questions are:
- When will the business launch?
- Who are my customers?
- Do I have work lined up when I start?
- What is my anticipated return on investment?
- How will I incorporate the business?
- What is my industry experience?
- Where will the business be located?
Many lenders will appreciate if you have taken the time to put together a business plan so they can be assured you will be able to pay back your loan.
Talk to an Expert
Expert is a term that I am using loosely. An expert is someone who has been there, done that, and can point you in the right direction for your business. Make sure the expert is someone with your best interests at heart, obviously. Almost every major city in the United States has a SCORE. From the SCORE website:
SCORE, America’s premier source of free and confidential small business advice for entrepreneurs and small businesses, is a nonprofit resource partner with the U.S. Small Business Administration (SBA). We have over 300 SCORE offices across the country offering free business mentoring and low- or no-cost workshops.
For over 50 years, SCORE’s thousands of working and retired business professionals have volunteered to support the success of small business nationwide. SCORE business mentoring is free and confidential.
SCORE offers great information and insight. I have gotten a lot out of SCORE here in San Diego myself. For a location nearest you, check here. * I am not affiliated and do not benefit from promoting SCORE, just my own personal experience.
If you don’t have a SCORE, you can ask other professionals from your industry how they got started and if they have any tips.
Sometimes we just have to let people do what it is they do best. I work with many startup businesses with a dynamic duo (or trio or whatever a group of four is called) of men and women who have different experiences but could benefit from teaming up. For example, a guy who has been in the construction industry for years and can put together an entire building all by himself, but has no idea about running a business. He may do well to find somebody who can take care of the operational and financial part of the business, so he can focus on doing what he knows how to do. One of my favorite sayings is “team work makes the dream work.”
As you can see, a bit of preparation can make starting your own business a little easier. Unexpected challenges will arise until you get into a rhythm with your new business to be sure, but don’t let easily foreseeable challenges get in your way. Starting a business is an exciting and terrifying experience all at the same time. I hope some of these tips can help you make your dream of business ownership a reality.
If you are ready to get started and would like more information, please call 619-333-1300, or contact us here.